First Quarter report January– March 2011 - HUGOBOSSgroup.hugoboss.com/files/HB_Q111_EN.pdf ·...

First Quarter reportJanuary – March 2011

02

hugo BossFirst Quarter report 2011

01 to our ShareholderS 04 Letter to shareholders05 Key Figures06 hugo Boss on the Capital Market

02 ConSolidated interim 09 group sales and results of operationsmanagement report 09 general economic situation

09 sector performance10 sales Devlopment13 earnings Development16 profit Development of the Business segments20 Net assets and Financial position25 report on risks and opportunities26 subsequent events and outlook30 summary on earnings, Net assets and

Financial position

03 ConSolidated interim 32 Consolidated income statementFinanCial Statement 33 statement of Comprehensive income

34 Consolidated Balance sheet35 statement of Changes in Consolidated equity36 Consolidated statement of Cash Flows37 Notes to the Consolidated interim

Financial statements

04 Further inFormation 48 Forward-Looking statements49 Financial Calendar and Contacts

CONTENTS

01

to our ShareholderS

04


letter to ShareholderS

Dear shareholders,Ladies and gentlemen,

hugo Boss has made a positive start to 2011. the results of the first quarter underline the sustained strength of our business model and the appeal of our brands in the key growth markets throughout the world.

in europe we posted growth, after adjustment for currency effects, of 14%. in addition to a double-digit increase in sales in germany, i would like to highlight our performance in the uK. growth of 25% in the first quarter provides an impressive demonstration of the ability of hugo Boss to hold its own even in markets with a difficult retail environment. supported by the takeover of 15 stores that were previously operated by a franchise partner, i expect that the uK will be our strongest growing market in europe again in 2011.

in america, we are continuing to benefit from an advantageous brand positioning. our promise of offering excellent quality at reasonable prices clearly differentiates us from our competitors – particularly in this market. the double-digit growth in the us wholesale business underlines the confidence that retailers have in hugo Boss. excellent sales of our collections provide the basis for acquiring additional selling space at an increasing number of retail partners. this allows us to present the entire breadth of the brand portfolio to american consumers. We are convinced that this will boost our image further and that this region will also be an engine of growth in future.

significant growth in america is currently only being exceeded by the asian market. in china, we more than doubled sales in the first quarter. the first-time consolidation of the joint venture founded in 2010 played a role here, as did the opening of new stores and strong growth in existing stores. on a like-for-like basis, sales increased by more than 20% in china in the first quarter. in particular, our product offerings in the luxury segment made a considerable contribution to this – for example, we tripled sales of Boss selection in china year-on-year.

the hugo Boss group is clearly on course for success. With the implementation of our D.r.i.V.e. project, we are working on our strategic growth pillars – greater consumer proximity, clearly differentiating group brands, expanding own retail and increasingly internationalizing the business model. i am confident that this focus will pay off in the form of double-digit increases in sales and profits in 2011.

sincerely yours,

ClauS-dietriCh lahrS ceo and chairman of the Managing Board

to our ShareholderSLetter to sharehoLDers

05


KeY FigureS

Jan. – mar. 2011

Jan. – mar. 2010

Change in %

Sales and earnings position (in eur million)

sales 539.2 444.2 21

gross profit 314.7 249.6 26

gross profit margin (in %) 58.4 56.2

eBitDa 131.9 91.4 44

eBitDa before special items 131.6 91.8 43

adjusted eBitDa margin (in %) 1 24.4 20.7

eBit 115.9 76.2 52

net income 83.5 56.3 48

march, 31 2011

march, 31 2010

Change in %

net assets and Financial position (in eur million)

total assets 1,398.9 1,128.4 24

shareholders’ equity 440.5 267.2 65

net working capital 276.4 224.5 23

cash flow from operating activities 23.7 70.0 (66)

net debt 187.5 315.8 (41)

investments 10.3 7.2 43

employees 2 10,032 8,919 12

Jan. – mar. 2011

Jan. – mar. 2010

Change in %

hugo BoSS Shares (in eur)

earnings per share

common shares 1.18 0.81 45

preferred shares 1.19 0.82 45

common share 3

Last 54.27 22.15 >100

high 55.06 22.24 >100

Low 42.06 17.78 >100

preferred share 3

Last 59.00 28.21 >100

high 59.82 28.78 >100

Low 46.26 22.17 >100

number of shares outstanding (in million) 4

common shares 35.86 35.86 0

preferred shares 34.54 34.54 0

1 eBitDa before special items/sales.

2 employees as of March 31.

3 Xetra.

4 number of shares outstanding as of March 31, including own shares.

to our ShareholderSKey Figures

06


hugo BoSS on the Capital marKet

german share indices started 2011 trending slightly upwards. hugo Boss shares also firmed in the first three months and performed better than the market as a whole.

January February March

120

115

110

105

100

95

90

85

80

Share priCe perFormanCe 2011 (index: December 31, 2010 = 100%)

— preFerred Share — Common Share — mdaX

Further reViVal in eQuitY marKetS in the FirSt Quarter oF 2011pleasing economic data from the usa, positively received corporate results and a raft of reports of planned mergers and takeovers invigorated equity markets in the first quarter of 2011. By contrast, the continuing political disturbances in the arab world and the Middle east, the fast moving debt crisis in the euro zone and the nuclear incident in Japan caused by the severe earthquake depressed markets. however, the price corrections triggered as a result were of only temporary duration, meaning that the markets gained further by and large in the months from January to March 2011.

hugo BoSS ShareS maKe a poSitiVe Start to 2011overall, hugo Boss shares performed better than the market in the first quarter of 2011. having risen sharply at the end of 2010, prices eased slightly at the beginning of 2011. nevertheless, the shares performed well during the first quarter and firmed significantly once more, most notably from mid-March 2011. here, the movement in the share price reflected the expectation of a positive sales and earnings development for 2011 and the financial market’s confidence that the targets set as part of the growth strategy will be achieved in 2015.

to our ShareholderShugo Boss on the capitaL MarKet

07


overall, the DaX rose by 2% in the period from January to March 2011. german mid-caps also made a very posi-tive start to 2011, with the MDaX gaining 2% in the first quarter, too. the hugo Boss shares performed more positively than the market in the first three months of the current year. the price of the hugo BoSS preFerred

Share increased by 4% and achieved a new all time high of eur 59.26 at the end of March. on 31 March 2011, the preferred share closed at eur 59.00. the price of the hugo BoSS Common Share even rose by 10% in the months from January to March 2011 and closed at its historic high of eur 54.27 on March 31 2011.

Weighting oF hugo BoSS preFerred ShareS in mdaX inCreaSeSat the end of March 2011, the hugo BoSS preFerred Share took 37th place in the Deutsche Börse ranking on the basis of free float adjusted market capitalization (March 2010: 47th place). in terms of its trading volume, it was ranked 42nd (March 2010: 44th). the weighting of the hugo BoSS preFerred ShareS in the MDaX was thus 1.0% at the end of March (March 2010: 0.6%). the average daily trading volume for preferred shares in the first three months of 2011 was 88,035 shares (2010: 99,988 shares). the common shares, which are traded much less due to the lower free float, recorded an average trading volume of 11,781 per day from January to March 2011 (2010: 8,571).

no Voting rightS announCementS reCeiVedin accordance with section 21 of the securities trading act (Wphg), shareholders are required to report the level of their shareholdings if they exceed or fall below certain thresholds. the thresholds for reporting are 3%, 5%, 10%, 20%, 25%, 30%, 50% and 75%. in the first three months of the fiscal year 2011, the company received no such announcements.

unChanged Shareholder StruCturethe shareholder structure of the total share capital of hugo Boss ag is made up as follows: 71.95% of the outstanding common and preference shares are held by permira holdings Limited via red & Black holding gmbh and 1.97% of the shares are held by hugo Boss ag as treasury shares. the remaining 26.08% of the outstand-ing shares are in free float.

no direCtorS’ dealingSDuring the reporting period from January 1 to March 31 2011, no securities transactions in company shares were reported to the company by the Managing Board or supervisory Board. in total, members of the Managing Board and the supervisory Board hold less than 1% of the shares issued by hugo Boss ag.

to our ShareholderShugo Boss on the capitaL MarKet

02

ConSolidated interim

management report

09


group SaleS and reSultS oF operationS

general eConomiC Situationthe recovery in the global economy continued at the beginning of the year. however, political turbulence in the arab World and the Middle east plus the nuclear incident in Japan gave rise to global uncertainty.

the economy in the euro Zone posted moderate growth in recent months thanks to a positive trend in foreign trade and rising consumer demand. however, the persistent debt crisis affecting some countries in the euro zone and the substantial levels of unemployment in many places depressed sentiment. all the same, the german economy continued to develop positively on the basis of strong export data and an upswing in domestic demand at the beginning of the year.

in the uSa, the first few months of 2011 were also marked by a continuation in the economic recovery. growth was aided by an improvement of the labor market situation and rising consumer expenditure. on the other hand, the us economy was burdened by rising commodity prices, the continuing difficulties on the real estate market and persistently high private debt. the economy in latin ameriCa benefited from higher prices for its commodity exports and made a positive start to 2011.

the aSian eConomY posted positive growth, due primarily to an upswing in exports, at the beginning of 2011. economic expansion in china, in particular, remained robust, although rising food and commodity prices depressed consumer confidence. in Japan, the severe earthquake and the nuclear incident put further pressure on the economy, which had only been posting anemic growth previously.

SeCtor perFormanCein the luxury goods industry, the positive developments of the past year continued in the current fiscal year. in developing markets, in particular, demand for premium and luxury goods remained high.

in recent months, sales growth in europe benefited from demand growth in russia and eastern europe. the sector performance also stabilized in southern european markets. By contrast, the industry’s performance was mixed in Western european core markets. While sales in germany grew further, sentiment in the uK retail trade was depressed by the increase in value added tax and falling disposable incomes. ameriCa benefited from a considerable increase in confidence in the premium and luxury goods segment, although consumers remained very price-sensitive. in aSia, the industry was adversely affected by the earthquake and the resultant nuclear incident in Japan – one of the world’s most important markets for luxury goods. however, significant growth in china meant that the negative repercussions on regional development were offset.

ConSolidated interim management reportgroup saLes anD resuLts oF operations

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SaleS deVelopmenthugo Boss’ group SaleS amounted to eur 539 million in the first three months of fiscal year 2011, which means that sales in the group currency were up 21% (19% in local currencies) on the previous year’s level (Q1 2010: eur 444 million). the effects of currency fluctuations had a positive impact on sales performance in the reporting period.

sales in europe including the Middle east/africa increased by 14% in local currencies in the first three months of fiscal year 2011. in the reporting currency, they were up 15% year-on-year at eur 352 million (Q1 2010: eur 305 million).

the ameriCaS posted a sales increase of 21% in local currencies in the past quarter. in the reporting currency, sales increased by 25% year-on-year in this region to reach eur 102 million (Q1 2010: eur 82 million).

hugo Boss group sales in aSia/paCiFiC were up 46% year-on-year in local currencies. in the first quarter of fiscal year 2011, sales in the reporting currency were up 55% year-on-year at eur 75 million (Q1 2010: eur 48 million) due to positive currency effects. the joint venture agreement for the chinese market contributed to this with additional sales of eur 14 million.

Further information on sales by region can be found in chapter “profit development of the business segments” on page 15 et seq.

Sales by distribution channel in eur million

Jan. – mar. 2011

in % of Sales

Jan. – mar. 2010

in % of Sales

Change in %

Currency adjusted

change in %

Wholesale 341.4 63.3 302.7 68.1 13 10

group’s own retail business

187.3

34.7

132.4

29.8

42

38

Dos 127.1 23.5 83.4 18.8 52 47

outlet 53.3 9.9 45.1 10.1 18 16

online 6.9 1.3 3.9 0.9 76 76

royalties 10.5 2.0 9.1 2.1 15 15

total 539.2 100.0 444.2 100.0 21 19

in the WholeSale Channel, there was a 13% increase in sales (10% increase after adjustment for currency effects) in the first three months of fiscal year 2011, with sales amounting to eur 341 million (Q1 2010: eur 303 million). the perceptible recovery in pre-order volumes and the continuing positive trend in replenish-ment, with which hugo Boss can react to short-term surges in demand from trading partners, contributed to this. the share of the wholesale channel in group sales decreased from 68% in the first quarter of 2010 to 63% in the first quarter of 2011.


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the development of SaleS in the group’S oWn retail BuSineSS (retail) remained positive, benefiting to a great extent from the consistently sustained professionalization of the existing network. With continued expan-sion in the current quarter, sales increased by 42% to eur 187 million in the first three months of fiscal year 2011 (Q1 2010: eur 132 million). this is equivalent to a 38% increase in sales after adjustment for currency effects. sales via directly operated stores including outlets and online stores therefore amounted to 35% of total sales (Q1 2010: 30%).

Sales by retail formatSaleS From direCtlY operated StoreS (doS) were increased by 52% (by 47% after adjustment for currency effects) to eur 127 million (Q1 2010: eur 83 million) in the first three months of fiscal year 2011. on a like-for-like basis, sales increased by 12% year-on-year in the reporting currency (by 8% after adjustment for currency effects).

in addition to directly operated stores, outlet StoreS also contributed to the positive development of sales in this distribution channel in the first three months of fiscal year 2011, with a sales increase of 18% (16% after adjustment for currency effects) to eur 53 million (Q1 2010: eur 45 million).

the international online retail aCtiVitieS are becoming increasingly important. sales generated from the existing online stores in germany, the netherlands, France, the uK, austria and the u.s. increased by 76% in the first quarter of 2011 to reach eur 7 million (Q1 2010: eur 4 million).

number of group‘s own retail storesin the first three months of 2011, the group’s global presence was expanded by 13 new locations and one franchise acquisition. this is offset by the closure of six retail stores and one outlet. the total number of own retail stores thus increased by seven in net terms since the beginning of the year, amounting to 544 in total (December 31, 2010: 537).

the retail network in the asia/pacific region was expanded through new openings in another four attractive locations in the growth market china. three of these new openings took place within the joint venture with the rainbow group founded in the prior year. these store openings again emphasize the significance of china for the expansion of the group’s own retail business and the international presence of the hugo Boss brand.

the retail network in europe was also expanded with eight new stores. the european branch network was further expanded by the opening of four shop-in-shop units in spain, two new openings in the uK, one additional location in poland and one franchise acquisition in portugal.

the expansion of the network of stores in the americas region was also stepped up in the past quarter through a new opening in both the usa and in Brazil.


12


royalty salesthere was a positive trend in roYaltY BuSineSS in the first three months of fiscal year 2011. royalty sales include license income from third parties. products manufactured by partners include fragrances, eyewear, watches, children’s fashion, and motorcycle helmets. external sales with outside licensees increased by 15% as against the previous year to eur 11 million (Q1 2010: eur 9 million).

Sales by brandhugo Boss posted sales increases in all five brands in the first quarter of fiscal 2011. a sales increase of 21% compared to the previous year was achieved in the core brand Boss Black. successful brand initiatives to reposition the luxury line Boss selection and the casualwear line Boss orange led to sales growth of 48% and 14% respectively compared to the previous year. the premium sportswear line Boss green also posted additional growth in the past quarter, exceeding the previous year’s figure by 55%. sales of the trendy brand hugo were up 12% on previous year‘s figure.

the share of total sales accounted for by womenswear remained unchanged at 12%. Double-digit sales increases were achieved with all four brands, whose product range encompasses a separate women’s collection.


13


earningS deVelopment

income statement in eur million

Jan. – mar. 2011

in % of Sales

Jan. – mar. 2010

in % of Sales

Change in %

net sales 539.2 100.0 444.2 100.0 21

cost of sales (213.8) (39.6) (186.5) (42.0) (15)

Direct selling expenses (10.7) (2.0) (8.1) (1.8) (32)

gross profit 314.7 58.4 249.6 56.2 26

selling and distribution expenses (152.5) (28.3) (132.8) (29.9) (15)

administration costs and other operating income/expenses

(46.3)

(8.6)

(40.6)

(9.2)

(14)

operating result (eBit) 115.9 21.5 76.2 17.2 52

net interest income/expense (3.8) (0.7) (4.3) (1.0) 12

other financial items (2.2) (0.4) 2.1 0.5 <-100

Financial result (6.0) (1.1) (2.2) (0.5) <-100

earnings before taxes 109.9 20.4 74.0 16.7 49

income taxes (26.4) (4.9) (17.7) (4.0) (49)

net income 83.5 15.5 56.3 12.7 48

attributable to:

equity holders of the parent company 81.9 15.2 56.2 12.6 46

Minority interests 1.6 0.3 0.1 0.0

net income 83.5 15.5 56.3 12.7 48

earnings per share (eur) 1

common share 1.18 0.81 45

preferred share 1.19 0.82 45

1 Basic and diluted earnings per share.

notes to the income statementgroSS proFit increased by 26% in the first three months to eur 315 million (Q1 2010: eur 250 million). thus, the groSS proFit margin was increased by 220 basis points to 58.4% (Q1 2010: 56.2%). since the group’s own retail business generates a higher gross profit margin, the above-average sales growth in this distribution channel supported the growth in the consolidated gross profit margin. in addition, the consistent enforcement of the pricing strategy, i.e. the higher share of sales at full price, contributed to the margin improvement in the group’s own retail business.

at eur 153 million, Selling and diStriBution eXpenSeS at the end of the first quarter of 2011 were 15% higher than the previous year’s figure (Q1 2010: eur 133 million). Due to the global expansion of the group’s own retail business, retail expenses rose by eur 15 million in the past quarter. this includes additional expenses for 7 new locations in net terms which were opened in the first quarter of 2011 as part of the global expansion of this distribution channel. in the past quarter, marketing expenses were up eur 7 million on the previous year’s figure. a major part of this related to sport sponsorship activities, for example, in connection with the 30th anniversary of the partnership between hugo Boss and McLaren or the partnership concluded at the beginning of the year with Martin Kaymer, who is the no. 1 in the golf world rankings. the consolidation and optimization of global warehousing capacity contributed to the fact that logistics expenses in the first quarter of 2011 were


14


at the same level as the previous year despite an increase in sales. allowances for doubtful accounts and bad debts only played a minor role because of the continuing, consistent management of receivables.

at eur 46 million in the first three months of fiscal year 2011, adminiStration CoStS and the BalanCe oF

other operating inCome and eXpenSeS were up 14% on the previous year’s level (Q1 2010: eur 41 million). administration costs were above the previous year‘s level, mainly as a result of an earlier recognition of expenses due to growth-related higher utilization, which will be balanced out over the year as a whole. at eur 13 million in the first three months, the research and development costs incurred in creating the collections were roughly eur 2 million higher than the previous year‘s level (2010: eur 11 million). special items in connection with the structural realignment and the changes in management in the past years did not play a role in the first quarter of 2011 as well as in the comparative period.

the internal performance indicator eBitda BeFore SpeCial itemS increased by 43% year-on-year to eur 132 mil-lion (Q1 2010: eur 92 million). the adjusted eBitDa margin improved by 370 basis points year-on-year to 24.4% (Q1 2010: 20.7%).

at eur 16 million, depreCiation increased by 5% as compared to the previous year’s level (Q1 2010: eur 15 million).

operating inCome (eBit) increased by 52% to eur 116 million in the first three months of fiscal year 2011 (Q1 2010: eur 76 million). higher selling and distribution expenses were overcompensated by the positive sales development in the retail channel as well as the improvement in the gross profit margin.

the net FinanCial reSult decreased by eur 4 million to eur -6 million in the first quarter (Q1 2010: eur -2 million). the increase in interest expenses resulting from higher interest rates was offset by higher interest income from investing cash and cash equivalents, which led to constant net interest expense of eur -4 million. as of the reporting date, the loss resulting from currency translation effects stood at eur -2 million (Q1 2010: eur 4 million). the substantial profit in the previous year, resulting from a significant depreciation in the euro, could not be achieved in the first quarter of 2011 because of the euro‘s adverse development. More significant exchange rate losses were avoided through effective hedging measures.

earningS BeFore taXeS thus increased by 49% to eur 110 million (Q1 2010: eur 74 million). at 24%, the tax rate was at the previous year’s level (Q1 2010: 24%). changes in the regional earnings mix resulting from dif-ferences in regional earnings growth had a neutral effect on the group’s tax rate in the past quarter.


15


at eur 84 million, net inCome increased by 48% in the first three months of fiscal year 2011 as compared to the previous year’s level (Q1 2010: eur 56 million). net income attributable to equity holders amounted to eur 82 million, approximately 46% higher than the previous year’s figure (Q1 2010: eur 56 million). Minority interests amounted to eur 2 million in the period (Q1 2010: eur 0 million) and primarily related to the 40% share of the rainbow group in the joint venture companies in china. earningS per Share increased by 45% year-on-year to eur 1.18 (Q1 2010: eur 0.81) for the Common ShareS, and by 45% year-on-year to eur 1.19 for the preFerred ShareS (Q1 2010: eur 0.82).


16


proFit deVelopment oF the BuSineSS SegmentS

ChangeS in preSentation – adJuStment to Segment reportingthe Managing Board of hugo Boss ag decided to adjust the presentation of segment reporting compared to the previous year. this adjustment is first-time effective with this report on the first quarter of fiscal year 2011.

hugo Boss has set itself the goal of significantly increasing sales and profit through organic growth in the coming years. the sales regions will though be managed on the basis of their value added at group level in future.

the distribution companies purchase all hugo Boss products on the basis of intercompany supply relationships at market prices from the respective hugo Boss sourcing units. to assess the profitability and value added contribution of the sales regions europe, ameriCaS and aSia/paCiFiC at group level the margins generated by all group companies involved in the supply chain will be taken into account in future. this approach is based on the assumption that each individual sales segment is autonomous and leads to the complete elimination of transactions between segments. as a result, the gross profit margin generated at the level of sourcing units will be allocated to the respective distribution company. earnings by reportable segments are now defined as eBitDa before special items of the respective distribution company plus the gross profit margin of the sourcing units and intercompany royalty sales.

this change to presentation leads to no operating income being allocated to the previously reportable Corporate

Center segment as the group-wide bundling of all central functions. rather the bundling of the remaining expenses of the sourcing, production, research and development units now constitutes an operating cost center, of which a direct allocation to the sales regions would not be appropriate.

royalty transactions with external license partners and directly attributable expenses for license management will continue to be presented in the reportable roYaltieS Segment. however, internal license income will no longer be taken into consideration as a consequence of it being allocated to the sales regions. expenses for the global marketing of hugo Boss products will no longer be allocated directly to the royalties segment either.

all expenses that are not directly attributable to the sales regions or the royalties segment are recognized in the reconciliation item corporate units/consolidation.

to allow the profit development of the segments to be compared over time, the presentation was also adjusted retroactively for the prior periods to match the presentation in the reporting period.

ConSolidated interim management reportproFit DeVeLopMent oF the Business segMents

17


SaleS BY region in eur million

Jan. – mar. 2011

in % of Sales

Jan. – mar. 2010

in % of Sales

Change in %

Currency adjusted

change in %

europe 1 351.7 65.2 304.8 68.6 15 14

americas 102.2 18.9 82.0 18.5 25 21

asia/pacific 74.8 13.9 48.3 10.9 55 46

royalties 10.5 2.0 9.1 2.1 15 15

total 539.2 100.0 444.2 100.0 21 19

1 incl. Middle east/africa.

earningS BY region

in eur million

Jan. – mar. 2011

in % of Sales

Jan. – mar. 2010

in % of Sales

Change in %

europe 1 143.8 40.9 119.2 39.1 21

americas 25.3 24.8 12.8 15.6 98

asia/pacific 25.3 33.8 15.4 32.0 64

royalties 8.8 83.8 7.8 85.5 13

Segment profit operating segments 203.2 37.7 155.2 34.9 31

corporate units/consolidation (71.6) (63.4)

eBitda before special items 131.6 24.4 91.8 20.7 43

1 incl. Middle east/africa.

europesales in europe including the Middle east/africa increased by 14% in local currencies in the first three months of fiscal year 2011. in the reporting currency, they were up 15% year-on-year at eur 352 million (Q1 2010: eur 305 million).sales increases were posted in all european marKetS in the past quarter. however, regional differences were apparent. at eur 92 million, sales in germanY were up 16% on the previous year‘s level (Q1 2010: eur 79 mil-lion). in FranCe, sales rose by 10% compared with the previous year to eur 49 million (Q1 2010: eur 44 million). in the BeneluX CountrieS, sales were up 6% on the previous year‘s level at eur 45 million (Q1 2010: eur 42 million). in the uK, sales increased by 24% year-on-year after adjustment for currency effects. amounting to eur 34 million, sales in the reporting currency were 29% higher than in the previous year (Q1 2010: eur 27 million). sales in southern european markets also developed positively. thus, sales in the iBerian peninSula increased by 26% eur 27 million (Q1 2010: eur 22 million). Business in italY also recovered appreciably. a sales increase of 19% to eur 18 million was apparent there in the first quarter (Q1 2010: eur 15 million). hugo Boss also posted significantly higher sales in the markets of SCandinaVia and eaStern europe.

at eur 144 million, Segment proFit in the european region was up eur 25 million on the previous year‘s figure (Q1 2010: eur 119 million). the increase in selling and distribution expenses was overcompensated by the positive sales development and an improvement in the gross profit margin. at 40.9%, the adjusted eBitDa margin therefore improved by 1.8 percentage points in comparison to the previous year (Q1 2010: 39.1%).


18


ameriCaSthe ameriCaS posted a sales increase of 21% in local currencies in the past quarter. in the reporting currency, sales increased by 25% year-on-year in this region to reach eur 102 million (Q1 2010: eur 82 million).in particular, an increase in sales of 27% in the local currency was achieved in the u.S. at eur 75 million in the reporting currency, sales increased by 28% there and they significantly exceeded previous year’s figure (Q1 2010: eur 59 million). Double-digit growth rates were achieved both in the wholesale channel and in sales from the group‘s own retail stores. in addition to a sales increase at existing own retail locations, additional sales were also generated through targeted new openings of own retail stores and the opening of the u.s. online store in the first half of 2010.after adjustment for currency effects, sales in Canada were 7% higher than in the previous year. the movement in the canadian dollar had a positive impact on sales in the reporting currency. in the past quarter, they therefore increased by 15% to eur 18 million (Q1 2010: eur 15 million). in Central and South ameriCa, an increase in sales of 7% in the local currencies was achieved. in the reporting currency, this corresponds to an increase of 15% to eur 9 million (Q1 2010: eur 8 million). this increase is mainly due to the positive development of the existing own retail locations as well as targeted new openings in the Mexican and Brazilian markets.

Segment proFit of eur 25 million in the ameriCaS region was significantly higher than the previous year’s level (Q1 2010: eur 13 million). in addition to an increase in sales, the main factor leading to the improvement in profit was the improvement in the gross profit margin in all markets due to the increasing share of retail business. a consistent implementation of the pricing strategy in wholesale and retail business in the u.s. market in particular caused an additional improvement in profit. the adjusted eBitDa margin in this region rose by 9.2 percentage points to 24.8% in the first quarter of fiscal year 2011 (Q1 2010: 15.6%).


19


aSia/paCiFiChugo Boss group sales in aSia/paCiFiC were up 46% year-on-year in local currencies. in the first quarter of fiscal year 2011, sales in the reporting currency were up 55% year-on-year at eur 75 million (Q1 2010: eur 48 million) due to positive currency effects. the joint venture agreement for the chinese market contributed to this with additional sales of eur 14 million. the share of sales achieved via the group’s own retail stores in the asia/pacific region increased from 52% in the first quarter of fiscal year 2010 to 74% in the first quarter of fiscal year 2011. as a result of the joint venture and targeted new openings of retail stores, sales in China have more than doubled compared to the previous year both in local currencies and in the reporting currency, amounting to eur 44 million (Q1 2010: eur 21 million). sales in auStralia were increased in the past fiscal year, particularly as a result of the takeover of locations of a franchisee in fiscal year 2010, whereas business in the JapaneSe

marKet remained difficult, last but not least due to the uncertainty resulting from the nuclear incident.

With sales increasing, Segment proFit in aSia/paCiFiC was also well up on the level of the previous year, at eur 25 million (Q1 2010: eur 15 million). the significant increase in the share of sales generated from the group‘s own retail stores contributed to an improvement in the gross profit margin. the retail stores added to the group as part of the joint venture agreed in July 2010 had a major influence on this development. the adjusted eBitDa margin in this region therefore rose by 1.8 percentage points year-on-year, reaching 33.8% in the first quarter of fiscal year 2011 (Q1 2010: 32.0%).

roYaltieSthe roYaltY BuSineSS also posted a sales increase in the past quarter. royalty sales include license income from third parties. products manufactured by partners include fragrances, eyewear, watches, children’s fashion, and motorcycle helmets. at eur 11 million, external sales with outside licensees were up 15% on the figure for the previous year (Q1 2010: eur 9 million). in the first three months of fiscal year 2011, double-digit growth was particularly achieved in sales with licensees for fragrances, eyewear and watches.

at eur 9 million, proFit in the roYaltieS Segment was up on the previous year’s level (Q1 2010: eur 8 million).


20


net aSSetS and FinanCial poSition

BalanCe Sheet StruCture and KeY BalanCe Sheet ratioSat the end of the first quarter of fiscal year 2011, total aSSetS were up 24% at eur 1,399 million (March 31, 2010: eur 1,128 million). this increase is mainly due to the rise in cash and cash equivalents and the global expansion of the group’s own retail business.

the eQuitY ratio increased to 31% (March 31, 2010: 24%).

Balance sheet structureas a result of the increase in cash and cash equivalents and in inventories, the Share oF Current aSSetS climbed to 67% as compared to 62% on March 31, 2010. accordingly, the Share oF non-Current aSSetS decreased from 38% in the previous year to 33% as of March 31, 2011.

the StruCture oF the liaBilitieS Side of the balance sheet remains significantly characterized by the utilized fixed credit line of the syndicated loan of eur 450 million. however, the share of financial liabilities decreased

BalanCe Sheet StruCture (in eur million)

property, plant and equipment and intangible assets 380.4

shareholders’ equity 440.5

provisions and deferred taxes 138.9

trade payables 159.7

other liabilities 129.6

Financial liabilities 530.2

368.8inventories 343.4

268.4trade receivables 207.7

184.4other assets 153.5

127.8cash and cash equivalents 313.9

179.0

267.2

106.7

92.8

132.8

528.9

aSSetS

liaBilitieS

1,398.9

march 31, 2011

1,128.4

March 31, 2010

1,398.9

march 31, 2011

1,128.4

March 31, 2010

ConSolidated interim management reportnet assets anD FinanciaL position

21


from 47% in the previous year to 38% as of March 31, 2011. this is mainly the result of the significant increase in shareholders’ equity due to the positive profit development.

net aSSetSon the assets side of the balance sheet, FiXed aSSetS were up slightly at eur 380 million at the end of the first quarter of fiscal year 2011 (March 31, 2010: eur 369 million). this was chiefly due to the asset additions resulting from the first-time consolidation of the joint venture in china. as part of the purchase price allocation, hidden reserves in intangible assets were recognized in the amount of eur 16 million and goodwill in the amount of eur 10 million. investments in the continued expansion of the group’s own retail business and the further development of the operational it systems were offset by disposals and depreciation/amortization.

at the end of the first quarter of fiscal year 2011, inVentorieS were up by 28% to eur 343 million (March 31, 2010: eur 268 million). currency effects, particularly in connection with the swiss franc, had a negative influence on the development of inventories. the finished goods added by the joint venture companies also increased this item. adjusted for currency effects and the first-time consolidation of the joint venture, inventories were up 22% year-on-year. this increase reflects the continued expansion of the group‘s own retail business. the increased volume in the purchase and production of goods due to the positive business development additionally led to a slight increase in raw materials inventories. average days inventory outstanding slightly decreased as compared to the previous year‘s level.

trade reCeiVaBleS increased by 13% year-on-year to eur 208 million (March 31, 2010: eur 184 million). this increase is the result of the spike in deliveries caused by the spring/summer collection 2011. currency effects on the receivables portfolio were evened out in the past quarter. as a result of the systematic monitoring of outstanding accounts and improved collection of receivables, the average days sales outstanding was reduced considerably as against the previous year‘s level.

other aSSetS increased by 20% year-on-year to eur 154 million (March 31, 2010: eur 128 million) as a result of the increase in the positive fair values of short-term and medium-term hedges and of bonus receivables from supply relationships.

CaSh and CaSh eQuiValentS amounted to eur 314 million as of the reporting date (March 31, 2010: eur 179 mil-lion). this increase was chiefly due to the development of cash flow from operations, which had a positive impact on the group’s liquidity situation.

on the liabilities side of the balance sheet, proViSionS and deFerred taXeS increased to eur 139 million (March 31, 2010: eur 107 million). this item includes provisions for pensions and other personnel expenses in the amount of eur 66 million (March 31, 2010: eur 54 million). it also includes other provisions totaling eur 50 million (March 31, 2010: eur 37 million) and deferred tax liabilities of eur 23 million (March 31, 2010: eur 16 million). trade paYaBleS increased by 20% to eur 160 million (March 31, 2010: eur 133 million), chiefly due to higher sourcing volumes. after adjustment for currency effects, this is equivalent to an increase of 17%.


22


total Current and non-Current FinanCial liaBilitieS increased slightly as compared to the previous year, totaling eur 530 million as of the reporting date (March 31, 2010: eur 529 million). this includes negative fair values of interest and currency hedges totaling eur 18 million (March 31, 2010: eur 34 million) and the deferred outstanding purchase price payments for the acquisition of the joint venture companies in china.

other liaBilitieS increased by 40% year-on-year to eur 130 million (March 31, 2010: eur 93 million). in addition to current tax payables, this item also includes the deferrals for the operating lease agreements of the group’s own retail stores.

net WorKing Capital is the hugo Boss group’s key performance indicator for measuring efficient use of capital. the main components involved in calculating this figure are the operating figures of inventories, trade receivables and trade payables.

in comparison to the previous year, net working capital increased by 23% to eur 276 million (March 31, 2010: eur 225 million). the changes in inventories and trade receivables were partly compensated for by the increase in trade payables. changes in other items of net working capital also had a positive influence on the level of this key figure as of the reporting date.

the 12-month moving average of net working capital in percentage of sales was reduced to 13.0% compared to the previous year (Q1 2010: 17.6%) and therefore remained more or less at the level of the historic low as of December 31, 2010. this development is chiefly due to the measures implemented to optimize net working capital.

net WorKing Capital (in % of sales)

30

20

10

0

30

20

10

0

Q2/2009

24.4%

Q1/2009

26.1%

Q4/2010

12.9%

Q1/2011

13.0%

Q3/2010

14.0%

Q4/2009

20.3%

Q3/2009

23.1%

Q2/2010

15.5%

Q1/2010

17.6%


23


FinanCial poSition

Cash flow statementthe cash flow statement is reported in accordance with ias 7. the cash and cash equivalents presented here correspond to the “cash and cash equivalents” item on the balance sheet.

in eur million

Jan. – mar. 2011

Jan. – mar. 2010

cash flow from operating activities 23.7 70.0

cash flow from investing activities (10.1) (7.1)

cash flow from financing activities 6.8 0.3

Change in cash and cash equivalents 19.0 64.9

as expected, the cash inflow from operating activities slowed considerably compared to the previous year, standing at eur 24 million at the end of the first quarter (Q1 2010: eur 70 million). While the repercussions of the financial crisis were still being felt at the beginning of fiscal year 2010, the first quarter of 2011 was character-ized by rapid growth. this is particularly apparent from the trend in net working capital.

the sharp increase in consolidated net income, which increased by eur 27 million to eur 84 million (Q1 2010: eur 56 million), and the change in inventories (eur +27 million since the beginning of the year) had a positive effect on cash flow.

By contrast, the volume-related rise in trade receivables and the reduction in trade payables reduced operating cash flow by eur 96 million in the course of the first quarter.

the cash outflow from investing activities amounted to eur 10 million in the first quarter of fiscal year 2011 and is hence 44% above the previous year‘s level (Q1 2010: eur 7 million). Main driver has been the expansion of the group‘s own retail business.

in terms of the group’s financing activities, cash receipts from current financial liabilities resulted in an inflow of eur 7 million (Q1 2010: eur 0 million).

net financial liabilitiesthe item for net financial liabilities comprises the total of all financial liabilities due to banks minus cash and cash equivalents and amounted to eur 187 million at the end of the first quarter. this corresponds to a decrease on the figure for the previous year of 41% (2010: eur 316 million).

Financial liabilities due to banks continued to consist mainly of utilization of the fixed credit line of the syndicated loan of eur 450 million and, at eur 501 million in total, were slightly up on the figure for the previous year (Q1 2010: eur 495 million). this was offset by the positive trend (driven by the inflow of funds) in cash and cash equivalents of eur 314 million (2010: eur 179 million).


24


Capital expenditureat eur 10 million, investments in property, plant and equipment and intangible assets were up 44% on the previous year’s level (Q1 2010: eur 7 million).

new investments in the first quarter of the current fiscal year were still focused on the gloBal eXpanSion and

moderniZation oF the group’S oWn retail netWorK. Besides the expenditure in new stores amounting to eur 3 million (Q1 2010: eur 3 million) another eur 3 million were spent on the modernization and renovation of existing locations (Q1 2010: eur 3 million). the number of the group’s own retail stores increased by seven in net terms in the first three months of fiscal 2011 to total 544.

another item within capital expenditure, with a total volume of eur 2 million, is expenses for the further develop-ment of the hugo BoSS logiStiCS and diStriBution SYStemS (Q1 2010: eur 1 million). this also includes the connection of additional retail stores to the sap retail software which is used throughout the group. Various other investment projects totaled eur 2 million (Q1 2010: eur 0 million).


25


report on riSKS and opportunitieS

there is a detailed presentation of hugo Boss’ risks and opportunities in the 2010 annual report. the statements made there on risks and opportunities are still valid. the risk situation is not expected to change significantly.

ConSolidated interim management reportreport on risKs anD opportunities

26


SuBSeQuent eVentS and outlooK

SuBSeQuent eVentS

acquisition of franchise stores in uK completedWith effective date april 1, 2011 the hugo Boss group acquired 15 hugo Boss monobrand stores and the associated fixed assets from Moss Bros, its most important franchise partner in the uK. in addition to eight locations in London and two stores in Manchester, the acquisition also includes a location each in five other english cities. as a result of the acquisition of these locations, the number of directly operated stores and thus the share of sales of directly operated retail business in the uK was increased further. the agreed purchase price payment for the acquisition of the locations and the associated fixed assets amounted to eur 19.5 million (gBp 16.5 million). the group expects the integration of the locations to have a positive impact on the sales and earnings development in the period from april to December 2011.

no further reportable eventsBetween the end of the first quarter of 2011 and the approval for publication of this report on april 19, 2011, there were no further significant macroeconomic, socio-political, sector-related or company-specific changes that the management expects will have a material influence on the results of operations, net assets and financial position of the group.

outlooK

overall economic outlookthe global economic development and the growth prospects of the premium and luxury segment for apparel, shoes and accessories have a major impact on the anticipated business development of the hugo Boss group.

the recovery of the world economy is likely to continue at a slower pace in 2011. For 2011 as a whole, the international Monetary Fund (iMF) expects the global economy to grow by around 4% to 5%, although the extent of economic growth will vary from region to region. the uncertain effects of fiscal austerity measures to reduce sovereign debt, rising inflation rates caused by higher commodity prices as well as currency fluctuations, represent major risks for global macroeconomic development in 2011. the impact of the severe earthquake and nuclear incident in Japan are not yet entirely foreseeable either.

the performance of the euro Zone economy is likely to vary considerably from region to region. in many countries on the periphery, a restrictive fiscal policy aimed at containing sovereign debt will limit economic growth. export activities are likely to weaken somewhat even in the region’s core markets. Despite this, economic growth for the euro zone is expected to average 1 – 2%. germany is considered capable of achieving above-average growth compared with the region as a whole. Low unemployment and stable domestic demand should contribute to this.

in the uSa, persistently high unemployment, the crisis on the real estate market and rising energy costs will continue to depress private consumption. Due to a moderate increase in investments and a continuing expan-sionary fiscal policy, economic growth is expected to be around the prior year level of approximately 3%. in the majority of the commodity producing countries in latin ameriCa, rising oil prices will lead to higher income and an increase in domestic demand. however, as a consequence of a more restrictive economic policy, economic growth is expected to soften moderately compared with the previous year to a good 4%.

ConSolidated interim management reportsuBseQuent eVents anD outLooK

27


continuing strong economic growth is expected in aSia. rising consumer demand, investments in infrastructure and an increasing export orientation in the region’s emerging economies should lead to growth of at least 8% for the region as a whole, excluding Japan. For the chinese market, continued strong expansion of almost 10% is expected. however, high capital inflows due to currency turbulence in other regions of the world increase the risk of inflation and overheating tendencies on the real estate market in china. in Japan, the consequences of the severe earthquake and the nuclear incident will weaken the local economy over the next few months.

Sector outlookafter the marked recovery of the luxury goods sector in 2010, continued growth is expected for 2011, albeit at a slower pace. industry experts anticipate sector growth of between 3% and 5%, assuming constant exchange rates.

in the industrialized nations of Western europe and north america, the expectation is for only moderate growth driven particularly by the ongoing expansion of directly operated retail activities. intense competition for market shares is anticipated in these markets over the coming years, which smaller competitors in particular could fall victim to as a result of market consolidation. in asia, the chinese market is likely to remain the major growth driver. as a result of the constantly growing middle class with higher income, the relevant consumer segment for the premium and luxury goods sector is expanding very fast in this market. this development is expected to particularly benefit european brands whose products are perceived by the consumers as particularly high-quality and valuable. in addition to china, other emerging economies in the region are also expected to see above-average growth. in contrast, in Japan industry experts anticipate a continued weak market development, which will be further depressed by the severe earthquake.

increase in group sales of at least 12% on a currency-neutral basis expectedhugo Boss anticipates more rapid growth in 2011 than in the previous year. group sales are expected to rise by at least 12% on a currency-adjusted basis. as a result, the increase will exceed the growth rates of the overall economy and the luxury goods sector. Due to the weaker basis of comparison from the previous year, growth in the first half of the year is likely to be higher than in the second half.

growth in all regionsthe hugo Boss group expects that all regions will contribute to the forecast sales growth across the group as a whole in 2011. growth in asia/pacific and the americas is likely to be faster than in europe. in the asia/pacific region, strong growth in china means that a significant double-digit increase in sales is anticipated. sales in the royalties segment should also develop positively.

own retail business remains engine of sales growthown retail will be the main sales driver for the group as a whole in 2011. own retail sales are expected to increase at a double-digit rate, mainly as a result of strong growth in directly operated stores and online. in addition to the positive effects of continued sales space expansion, comp store revenues are also expected to rise. the group is benefiting here from further professionalization of its retail activities. Wholesale sales are also expected to increase. this forecast is based on the positive order development. the acquisition of franchise partners, particularly in china, the uK, australia and poland, will have a positive impact on sales development in own retail and a negative impact on wholesale revenues. For the group as a whole, the effect is expected to be positive.


28


Continued sales space expansion in own retailthe hugo Boss group is planning to increase the number of its own stores by 70 net new stores in 2011. this figure includes 15 stores in the uK, which were acquired from the group’s previous franchise partner Moss Bros on april 1. china will be a major focus in terms of store openings. the majority of the new stores and shops in this market will be opened as part of the joint venture with the rainbow group. the group also sees attractive opportunities for expansion in the european market in particular.

gross margin to increasethe hugo Boss group’s gross margin is likely to increase in 2011. this will mainly be a consequence of the increasing share of own retail sales. the group plans to compensate the effect from rising sourcing costs through efficiency improvements in production and sourcing as well as selective price increases.

eBitda before special items is to rise by at least 15%hugo Boss expects eBitDa before special items to increase by at least 15% in 2011. this development will be due, most notably, to the anticipated increase in sales and an improved gross profit margin. operating expenses will increase mainly due to the further expansion of own retail activities and higher marketing expenses for sharpening brand differentiation. as a result of the eBitDa improvement before special items, net income is also forecasted to grow.

Strict management of net working capitalstrict management of net working capital continues to be a high priority so as to generate improvements in operating cash flow. particular attention is given to reducing the cash conversion cycle. potential for improvement is seen particularly in increasing the inventory turnover. overall, the group does not expect the net working capital increase to exceed sales growth in 2011.

Capital expenditure to focus on own retail expansionthe group plans capital expenditure of around eur 90 million in 2011. of this figure, circa eur 20 million will relate to the acquisition of the 15 stores previously managed on a franchise basis by Moss Bros in the uK. capital expenditure will also focus on expanding own retail activities and renovating existing stores and shops. other investment areas include the further development of the group’s it infrastructure and optimizations in production and logistics. the group expects to finance the planned investments entirely from available liquidity and operating cash flow, respectively.

Continued strong cash flow developmentthe group anticipates that cash flow will continue to develop strongly in 2011, primarily due to the improved profit development, strict management of net working capital, and disciplined investment activity. in addition to the dividend payment, excess funds are to be used to further reduce debt. accordingly, the group expects net debt at the end of the year to be lower than in the previous year.

management intends to propose dividend of eur 2.03 per preferred share to the annual Shareholders’ meetinghugo Boss pursues a profit-based dividend policy under which the shareholders participate appropriately in the group’s profit development. against the background of the significant increase in profit in the past fiscal year and the positive expectations for 2011, the Managing Board and supervisory Board will propose a dividend of eur 2.03 per preferred share (2009: eur 0.97) and eur 2.02 per common share (2009: eur 0.96) to the annual shareholders’ Meeting on May 10, 2011. the proposal corresponds to a payout ratio of 75% of consolidated


29


net income attributable to shareholders in 2010 (2009: 64%). provided the shareholders approve the proposal, the dividend will be paid out on the day following the annual shareholders’ Meeting, i.e. on May 11, 2011. Based on the number of shares outstanding at the end of the first quarter of 2011, the amount distributed will total eur 140 million (2009: eur 67 million).

Continued growth in 2012assuming continued economic growth in the group’s core markets, the management plans to achieve further increases in sales and earnings in 2012. however, in particular a significant weakening of consumer sentiment, cost inflation in the sourcing processes and negative changes in the brand image could jeopardize the achieve-ment of this goal. the group has taken countermeasures to limit the effects if these or other risks occur. Details can be found in the risk report in the annual report 2010.


30


SummarY on earningS, net aSSetS and FinanCial poSition

in summary, earnings, net assets and the financial position indicate that hugo Boss group continued to be in a sound financial position at the time that this report for the first three months of fiscal year 2011 was prepared.

Metzingen, april 19, 2011

hugo Boss agthe Managing Board

ClauS-dietriCh lahrS

ChriStoph auhagen

marK langer

ConSolidated interim management reportsuMMary on earnings, net assets anD FinanciaL position

03

ConSolidated interim FinanCial

Statement

32


ConSolidated inCome Statementof the hugo Boss group for the period from January 1 to March 31, 2011

in eur million Jan. – march 2011 Jan. – march 2010

net sales 539.2 444.2

cost of sales (213.8) (186.5)

Direct selling expenses (10.7) (8.1)

gross profit 314.7 249.6

in % of sales 58.4 56.2

selling and distribution expenses (152.5) (132.8)

administration costs and other operating income/expenses (46.3) (40.6)

operating result (eBit) 115.9 76.2

in % of sales 21.5 17.2

net interest income/expense (3.8) (4.3)

other financial items (2.2) 2.1

Financial result (6.0) (2.2)

earnings before taxes 109.9 74.0

income taxes (26.4) (17.7)

net income 83.5 56.3

attributable to:

equity holders of the parent company 81.9 56.2

Minority interests 1.6 0.1


earnings per share (eur) 1

common share 1.18 0.81

preferred share 1.19 0.82


ConSolidated interim FinanCial StatementconsoLiDateD incoMe stateMent

33


Statement oF ComprehenSiVe inComeof the hugo Boss group for the period from January 1 to March 31, 2011

in eur million

Jan. – march 2011

Jan. – march 2010


Market valuation of hedges 5.3 (2.8)

currency differences (9.5) 8.3

income and expenses recognized directly in equity (4.2) 5.5

total comprehensive income 79.3 61.8

attributable to:

equity holders of the parent company 78.4 61.8

Minority interests 0.9 0.0

total comprehensive income 79.3 61.8

ConSolidated interim FinanCial StatementstateMent oF coMprehensiVe incoMe


ConSolidated BalanCe Sheetof the hugo Boss group as of March 31, 2011

aSSetSin eur million march 31, 2011 march 31, 2010

intangible assets 124.1 101.0

property, plant and equipment 256.3 267.8

Deferred tax assets 49.7 48.2

non-current financial assets 19.1 6.5

non-current tax receivables 3.1 3.3

other non-current assets 2.7 4.3

non-current assets 455.0 431.1

inventories 343.4 268.4

trade receivables 207.7 184.4

current tax receivables 10.3 14.4

current financial assets 15.4 9.3

other current assets 51.9 41.8

cash and cash equivalents 313.9 179.0

assets classified as held for sale 1.3 0.0

Current assets 943.9 697.3

total assets 1,398.9 1,128.4

eQuitY and liaBilitieSin eur million march 31, 2011 march 31, 2010

subscribed capital 70.4 70.4

own shares (42.3) (42.3)

capital reserve 0.4 0.4

retained earnings 347.1 227.7

accumulated other comprehensive income (35.3) (44.8)

profit attributable to equity holders of the parent company

81.9

56.3

equity attributable to equity holders of the parent company

422.2

267.7

Minority interests 18.3 (0.5)

group equity 440.5 267.2

non-current provisions 39.8 33.5

non-current financial liabilities 506.6 497.4

Deferred tax liabilities 23.3 16.0

other non-current liabilities 28.1 23.1

non-current liabilities 597.8 570.0

current provisions 75.7 57.1

current financial liabilities 23.6 31.5

income tax payables 44.6 20.8

trade payables 159.7 132.8

other current liabilities 57.0 49.0

Current liabilities 360.6 291.2

total equity and liabilities 1,398.9 1,128.4

34ConSolidated interim FinanCial StatementconsoLiDateD BaLance sheet


Statement oF ChangeS in ConSolidated eQuitYof the hugo Boss group for the period from January 1 to March 31, 2011

retained earnings

accumulated other comprehensive income

in eur million

Subscribed Capital

own Shares

Capital reserve

legal reserve

other reserves

difference arising

from currency translation

market

valuation of hedges

profit attributable to equity holders of the

parent

equity attributable to equity holders of the

parent

minority interests

group equity

January 1, 2010 70.4 (42.3) 0.4 6.6 117.1 1 (30.7) (19.6) 104.0 205.9 (0.5) 205.4

total comprehensive income 8.3 (2.8) 56.3 61.8 61.8

allocated to retained earnings 104.0 (104.0)

Dividend payment

share repurchase

march 31, 2010 70.4 (42.3) 0.4 6.6 221.1 (22.4) (22.4) 56.3 267.7 (0.5) 267.2

January 1, 2011 70.4 (42.3) 0.4 6.6 154.6 (14.9) (16.9) 185.9 343.8 17.4 361.2

total comprehensive income (8.8) 5.3 81.9 78.4 0.9 79.3

allocated to retained earnings 185.9 (185.9)

Dividend payment

share repurchase

march 31, 2011 70.4 (42.3) 0.4 6.6 340.5 (23.7) (11.6) 81.9 422.2 18.3 440.5

1 the previous year‘s figure has been adjusted. please refer to the note „changes in presentation“ of the annual report 2010.

35ConSolidated interim FinanCial StatementstateMent oF changes in consoLiDateD eQuity

36


ConSolidated interim FinanCial StatementconsoLiDateD stateMent oF cash FLoWs

ConSolidated Statement oF CaSh FloWSof the hugo Boss group for the period from January 1 to March 31, 2011

in eur million

Jan. – march 2011

Jan. – march 2010


Depreciation/amortization 16.0 15.2

unrealized net foreign exchange gain/loss 1 3.1 (4.5)

other non-cash transactions 1 (6.2) 1.4

income tax expense/refund 26.4 17.7

interest income and expenses 3.8 4.3

change in inventories 1 27.4 46.5

change in receivables and other assets 1 (73.5) (32.7)

change in trade payables and other liabilities 1 (22.8) (15.4)

result from disposal of non-current assets 0.1 0.0

change in provisions for pensions 0.5 1.4

change in other provisions (8.4) (1.6)

income taxes paid (21.9) (14.3)

Cash flow from operations 28.0 74.3

interest paid 1 (5.1) (4.8)

interest received 0.8 0.5

Cash flow from operating activities 23.7 70.0

investments in ppe 2 and intangible assets (10.3) (7.2)

payment for changes in scope of consolidation 0.0 0.0

cash receipts from sales of ppe 2 and intangible assets 0.2 0.1

Cash flow from investing activities (10.1) (7.1)

change in current financial liabilities 1 6.7 0.2

repayment of non-current financial liabilities 1 0.0 (0.3)

cash receipts from non-current financial liabilities 1 0.1 0.4

Cash flow from financing activities 6.8 0.3

exchange rate-related changes in cash and cash equivalents (1.4) 1.7

Change in cash and cash equivalents 19.0 64.9

cash and cash equivalents at the beginning of the period 294.9 114.1

Cash and cash equivalents at the end of the period 313.9 179.0

1 the previous year’s figure has been adjusted. please refer to the note “changes in presentation” of the annual report 2010.

2 property, plant and equipment.

37


ConSolidated interim FinanCial Statementnotes to the consoLiDateD interiM FinanciaL stateMents

noteS to the ConSolidated interim FinanCial StatementS

1 // general inFormationthe interim financial report of hugo Boss ag as of March 31, 2011, prepared pursuant to section 37x of the securities trading act in accordance with the international Financial reporting standards (iFrs) and their interpretations that were valid as of the balance sheet date. the regulations of ias 34 on interim Financial reporting were applied in particular. the current interim financial report as of March 31, 2011 was not subjected to an audit review. the consolidated interim management report and the consolidated interim financial statements were not audited in line with articel 317 of the german commercial code nor were they subjected to a review on the part of a person authorized to conduct an audit.

2 // aCCounting poliCieSall interim reports of companies included in the consolidated interim report were prepared with uniform accounting policies, which were also the basis of the consolidated financial statements of December 31, 2010. a detailed description of the applied accounting and consolidation methods can be found in the notes to the 2010 consolidated financial statements.

3 // ChangeS in preSentationthe management believes that the following changes result in a more accurate presentation of earnings, net assets and the financial position of the group. to allow the financial statements of the group to be compared over time, the presentation of the items in the financial statements was also adjusted retroactively for the prior periods to match the presentation in the reporting period.

Segment reportingstarting with the report of the First Quarter 2011, the Managing Board of hugo Boss ag decided to adjust the presentation of segment reporting compared to the previous year. hugo Boss has set itself the goal of significantly increasing sales and profit through organic growth in the coming years. the sales regions will therefore be managed on the basis of their value added at group level in future.

earnings by operative segments are now defined as eBitDa before special items of the respective distribution company plus the gross profit margin of the sourcing units and intercompany royalty sales. as a result, the gross profit margin generated at the level of sourcing units will be allocated to the respective distribution company.

this change to presentation led to no operating income being allocated to the previously reportable corporate center segment as the group-wide bundling of all central functions. rather the bundling of the remaining expenses of the sourcing, production, research and development units now constitutes an operating cost center, direct allocation of which to the sales regions would not be appropriate.

royalty transactions with external license partners and directly attributable expenses for license management will continue to be presented in the operative royalties segment. however, internal license income will no longer be taken into consideration as a consequence of it being allocated to the sales regions. expenses for the global marketing of hugo Boss products will no longer be allocated directly to the royalties segment either.

38



all expenses that are not directly attributable to the sales regions or the royalties segment are recognized in the reconciliation item corporate units/consolidation.consequently, the presentation of the segment report for the current fiscal year and for the comparative period January 1 – March 31, 2010, was adjusted. Further information can be found in note 14, segment reporting.

4 // CurrenCY tranSlationthe exchange rates of the most relevant currencies used in the interim statements changed as follows in relation to the euro in the reporting period:

Currency average rate Closing rate

country

1 eur =

Jan. – march 2011

Jan. – march 2010

march 31, 2011

march 31, 2010

australia auD 1.3602 1.5335 1.3668 1.4650

Brazil BrL 2.2775 2.4966 2.3128 2.4140

canada caD 1.3471 1.4425 1.3674 1.3731

china cny 8.9890 9.4533 9.2381 9.2025

Denmark DKK 7.4548 7.4427 7.4573 7.4439

great Britain gBp 0.8528 0.8869 0.8789 0.8933

hong Kong hKD 10.6348 10.7493 10.9696 10.4682

Japan Jpy 112.4274 125.6423 117.0100 124.8000

Macau 1 Mop 10.9433 n/a 11.3218 n/a

Mexico MXn 16.4807 17.7253 16.7932 16.8040

norway noK 7.8238 8.1130 7.8675 8.0410

sweden seK 8.8619 9.9655 8.9185 9.7803

switzerland chF 1.2870 1.4645 1.2993 1.4316

usa usD 1.3656 1.3846 1.4090 1.3482

1 since July 1, 2010: Lotus concept trading (Macau) co., Ltd.

5 // eConomiC and SeaSonal inFluenCeSas a global company, the hugo Boss group is exposed to various economic developments. industry-specific seasonal fluctuations are typical for hugo Boss. however, hugo Boss’ operations have changed fundamen-tally in past years. While the business used to be dominated by two pre-order seasons (spring/summer and fall/ winter) with orders being placed accordingly early, it has now become increasingly complex. For example, preorder business now consists of four seasonal sales every year. in addition, the significance of seasonal influences is decreasing as a result of the global expansion of directly operated retail activities. Furthermore, hugo Boss also makes every effort to increase efficiency through greater use of stock business to service less fashion-oriented items. the number of monthly theme-oriented deliveries is also climbing continuously. these effects are steadily reducing the seasonality over the course of hugo Boss’ business.

6 // SCope oF ConSolidationDuring the reporting period from January 1 to March 31, 2011, the number of consolidated companies remained the same in comparison to the consolidated financial statements as of December 31, 2010, at 55 companies.

39



7 // minoritY intereStSthe consolidated financial statements include companies in which hugo Boss ag holds less than 100% of the equity. in accordance with ias 27, these minority interests are reported in equity separately from the equity held by the shareholders of hugo Boss ag in the consolidated balance sheet.

8 // noteS to the ConSolidated inCome Statement

CoSt oF SaleS and direCt Selling eXpenSeS in eur million

Jan. – march 2011

Jan. – march 2010

purchased goods and own costs capitalized 167.7 150.2

purchased services 30.7 22.2

own production 15.4 14.1

Direct selling expenses 10.7 8.1

224.5 194.6

Direct selling costs primarily include sales commissions, freight and duties charges as well as credit card fees.

Selling and diStriBution eXpenSeS in eur million

Jan. – march 2011

Jan. – march 2010

expenses for own retail business, indirect sales and marketing organization 95.3 80.0

Marketing spendings 31.4 24.1

Logistics and sourcing expenses 25.7 25.6

Bad Debts/Losses 0.1 3.1

152.5 132.8

alongside personnel expenses, rental expenses are the largest item in the expenses for group‘s own retail business, indirect selling and marketing organization.

in addition to personnel and rental expenses for wholesale distribution, the expenses for indirect selling and marketing organization also include other expenses for brand management, retail services and regional sales management.

40



adminiStratiVe CoStS and other operating eXpenSeS/inCome

in eur million

Jan. – march 2011

Jan. – march 2010

general administration costs 33.8 28.9

research and development costs 12.8 11.4

special items (0.3) 0.3

46.3 40.6

administrative expenses consist largely of rent for premises, maintenance costs, it operating costs, and legaland consulting fees, as well as the personnel expenses of the respective functional areas. in the hugo Boss group, research and development expenses are incurred primarily for the creation of fashion collections.

the personnel expenses break down as follows: in eur million

Jan. – march 2011

Jan. – march 2010

Wages and salaries 76.6 69.4

social security 12.9 11.7

expenses and income for retirement benefits and aid 1.1 1.4

90.6 82.5

the number of employees changed as follows: employees

march 31, 2011

march 31, 2010

industrial employees 4,681 4,016

commercial and administrative employees 5,351 4,903

10,032 8,919

depreciation and amortization break down as follows: in eur million

Jan. – march 2011

Jan. – march 2010

non-current assets

tangible assets 13.0 12.5

intangible assets 3.0 2.7

16.0 15.2

41



9 // earningS per Sharepursuant to ias 33, earnings per share (eps) are calculated by dividing the net income or loss for the period by the weighted average number of shares outstanding during the period. there were no shares outstanding that could have diluted earnings per share either as of March 31, 2011 or as of March 31, 2010.

in eur million

Jan. – march 2011

Jan. – march 2010


average number of shares outstanding 1

common shares 35,331,445 35,331,445

preferred shares 33,684,722 33,684,722

eps common shares in eur 2 1.18 0.81

eps preferred shares in eur 2 1.19 0.82

1 regardless of own shares.


10 // treaSurY ShareSin the first three months of fiscal year 2011, hugo Boss ag did not purchase any treasury shares. hugo Boss ag thus held a total of 528,555 common shares and 855,278 preferred shares after the first three months of fiscal year 2011. this corresponds to a share of 1.97% or eur 1,383,833 of the share capital.

11 // aCCumulated other ComprehenSiVe inComeaccumulated other comprehensive income reflects differences arising from the translation of foreign subsidiaries’ financial statements with a negative impact on equity of eur –23.7 million (March 31, 2010: eur –22.4 million) and the effects from the measurement of financial instruments after taxes, neither of which is recognized in income. Deferred tax income not recognized in the income statement amounts to eur 4.0 million (March 31, 2010: eur 7.7 million).

please see the consolidated statement of comprehensive income for information on income and expenses recognized in equity.

12 // Contingent liaBilitieS and Contingent aSSetSthere were no material changes in contingent liabilities as against December 31, 2010. there were no contingent assets as of March 31, 2011.

42



13 // CaSh FloW Statementthe hugo Boss group’s cash flow statement shows the changes that occurred in cash and cash equivalents during the year under review on the basis of cash transactions. pursuant to ias 7, cash flows are reported sepa-rately according to source and application in operating activities, investing activities, and financing activities. cash flows are derived indirectly based on the group’s net income. changes in the balance sheet items presented in the cash flow statement cannot be derived directly from the balance sheet due to adjustments for currency effects.

14 // Segment reportingthe Managing Board of hugo Boss ag leads the group by geographic areas. the hugo Boss national distribu-tion companies are responsible for the sales of all hugo Boss products that are not sold as licensed products by third parties in their respective regions. the Manging Directors of the national companies are responsible to the competent regional directors, who report to the Managing Board of hugo Boss ag as a whole. this organizational structure ensures that group targets are implemented directly while taking account of particular market conditions.

the operative segments are therefore divided into the three regions of europe, americas, and asia/pacific as well as the royalties segment. the respective distribution companies of the hugo Boss group are allocated to the reportable regional sales segments, while the royalties segment separates out all of hugo Boss’ licensing business with third parties.

the chief operating decision maker of the hugo Boss group is defined as the Managing Board of hugo Boss ag as a whole.

the management of the regional business units is aligned to the value added contribution at group level. the most important key figure for the Managing Board and the allocation of resources by the Managing Board as a whole is eBitDa before special items. the segment profit is therefore defined as eBitDa before special items of the respective distribution units plus the gross profit margin of the sourcing units and intercompany royalty sales.

group financing (including interest income and expense) and income taxes are managed on a group-wide basis and are thus not assigned to individual business segments.

Managing the operating figures inventories and trade receivables is the responsibility of the sales regions. these items are reported on a regular basis to the Managing Board as a whole. thus, segment assets only comprise trade receivables and inventories.

Liabilities are not part of segment reporting. as a result, segment liabilities are not disclosed.

43



the group’s internal reporting is structured in such a way that it reports in compliance with the international Financial reporting standards (iFrs).

the Managing Board as a whole reviews certain effects recognized in the statement of comprehensive income on a regular basis, these include impairment losses and depreciation/amortization in particular.

capital expenditure is also reported to the Managing Board on a regular basis as part of the internal reports and is therefore a component of segment reporting.

all expenses and assets that are not directly attributable to the sales regions or the royalties segment are recognized in the following reconciliation statements under corporate units/consolidation.

44

Segment reporting

europe 1

americas asia/pacific royalties

total operating Segments

in eur million

Jan. – march 2011

Jan. – march 2010

Jan. – march 2011

Jan. – march 2010

Jan. – march 2011

Jan. – march 2010

Jan. – march 2011

Jan. – march 2010

Jan. – march 2011

Jan. – march 2010

net Sales 351.7 304.8 102.2 82.0 74.8 48.3 10.5 9.1 539.2 444.2

Segment profit 143.8 119.2 25.3 12.8 25.3 15.4 8.8 7.8 203.2 155.2

in % of net sales 40.9 39.1 24.8 15.6 33.8 32.0 83.8 85.5 37.7 34.9

segment assets 183.9 181.8 122.5 94.9 66.5 40.7 10.5 8.9 383.4 326.3

capital expenditure 1.7 3.0 3.8 2.1 1.2 0.6 0.0 0.0 6.7 5.7

impairments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

thereof tangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

thereof intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depreciation/amortization (4.1) (4.5) (2.7) (2.9) (2.7) (1.3) 0.0 0.0 (9.5) (8.7)

sar expenses and hedging 0.0 (0.2) 0.0 (0.1) 0.0 0.0 0.0 0.0 0.0 (0.3)

1 incl. Middle east and africa.



45



reConCiliation

net Sales in eur million

Jan. – march

2011

Jan. – march

2010

net sales – operating segments 539.2 444.2

corporate units/consolidation 0.0 0.0

net sales hugo BoSS group 539.2 444.2

operating income in eur million

Jan. – march 2011

Jan. – march 2010

Segment profit – operating segments 203.2 155.2

Depreciation/amortization – operating segments (9.5) (8.7)

impairments – operating segments 0.0 0.0

special items – operating segments 0.3 0.4

operating income (eBit) – operating segments 194.1 146.9


operating income (eBit) hugo BoSS group 115.9 76.2

net interest income/expenses (3.8) (4.3)

other financial items (2.2) 2.1

earnings before taxes hugo BoSS group 109.9 74.0

Capital expenditure in eur million

Jan. – march 2011

Jan. – march 2010

Capital expenditure – operating segments 6.7 5.7


Capital expenditure hugo BoSS group 10.3 7.2

depreciation/amortization in eur million

Jan. – march 2011

Jan. – march 2010

depreciation/amortization – operating segments (9.5) (8.7)


depreciation/amortization hugo BoSS group (16.0) (15.2)

46



impairment in eur million

Jan. – march 2011

Jan. – march 2010

impairment – operating segments 0.0 0.0


impairment hugo BoSS group 0.0 0.0

Sar expenses and hedging in eur million

Jan. – march 2011

Jan. – march 2010

Sar expenses and hedging – operating segments 0.0 (0.3)

corporate units/consolidation 0.0 (1.1)

Sar expenses and hedging hugo BoSS group 0.0 (1.4)

Segment assets in eur million

Jan. – march 2011

Jan. – march 2010

Segment assets – operating segments 383.4 326.3


current tax receivables 10.3 14.4

current financial assets 15.4 9.3

other current assets 51.9 41.8

cash and cash equivalents 313.9 179.0

assets classified as held for sales 1.3 0.0

Current assets hugo BoSS group 943.9 697.3

non-current assets 455.0 431.1

total assets hugo BoSS group 1,398.9 1,128.4

15 // eVentS aFter the BalanCe Sheet dateWith effective date april 1, 2011 the hugo Boss group acquired 15 hugo Boss monobrand stores and the associated fixed assets from Moss Bros, its most important franchise partner in the uK. in addition to eight locations in London and two stores in Manchester, the acquisition also includes a location each in five other english cities. as a result of the acquisition of these locations, the number of directly operated stores and thus the share of sales of directly operated retail business in the uK was increased further. the agreed purchase price payment for the acquisition of the locations and the associated fixed assets amounted to eur 19.5 million (gBp 16.5 million). Due to iFrs 3, the acquired assets and liabilities must be measured at their resepective faire value at the acquisition date. at the time of publication of the First Quarter report 2011, the revaluation within the purchase price allocation could not be finalized. the group expects the integration of the locations to have a positive impact on the sales and earnings develop-ment in the period from april to December 2011.

03

Further inFormation

48


Further inFormationForWarD-LooKing stateMents

ForWard-looKing StatementS

this document contains forward-looking statements that reflect management’s current views with respect tofuture events. the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project“, “should,” and similar expressions identify forward-looking statements. such statements are subject to risks and uncertainties. if any of these or other risks or uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, whichspeaks only as of the date on which it is made.

49


Further inFormationFinanciaL caLenDar anD contacts

FinanCial Calendar and ContaCtS

First Quarter report 2011

annuaL sharehoLDers’ Meeting

First haLF year report 2011

First nine Months report 2011

april 28, 2011

maY 10, 2011

JulY 28, 2011

noVemBer 2, 2011

phone +49 (0) 7123 94 - 1326

e-MaiL [email protected]

heaD oF inVestor reLations

phone +49 (0) 7123 94 - 86267

FaX +49 (0) 7123 94 - 886267

heaD oF corporate coMMunication

phone +49 (0) 7123 94 - 2375

FaX +49 (0) 7123 94 - 2051

WWW.hugoBoss.coM / the coMpany / orDer serVice

inVeStor relationS

denniS WeBer

dr. hJördiS KettenBaCh

reQueSt For annual reportS

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