Contents. to our shareholders. consolidated interim financial statements. consolidated interim management. further information

Transcription

1 First Quarter Report January March 2013

2 Contents 2 Contents 1 to our shareholders Letter to Shareholders p. 4 Key Figures p. 6 HUGO BOSS on the Capital Market p. 7 2 consolidated interim management report Group Sales and Results of Operations p. 11 General Economic Situation p. 11 Sector Performance p. 12 Sales Performance p. 13 Earnings Development p. 17 Profit Development of the Business Segements p. 20 Net Assets and Financial Position p. 24 Balance Sheet Structure and Key Balance Sheet Ratios p. 24 Net Assets p. 25 Financial Position p. 27 Capital Expenditure p. 28 Report on Risks and Opportunities p. 29 Subsequent Events and Outlook p. 30 Summary on Earnings, Net Assets and Financial Position p consolidated interim financial statements Consolidated Income Statement p. 36 Statement of Comprehensive Income p. 37 Consolidated Balance Sheet p. 38 Statement of Changes in Consolidated Equity p. 39 Consolidated Statement of Cash Flows p. 40 Condensed Notes to the Consolidated Interim Financial Statements p further information Forward-Looking Statements p. 54 Financial Calendar 2013 p. 54 Contacts p. 54

3 TO OUR SHAREHOLDERS 1

4 Letter to Shareholders 4 Letter to Shareholders Dear Shareholders, Ladies and Gentlemen, The economic environment remained difficult in the first few months of HUGO BOSS was unable to escape this either. Therefore, in line with our expectations and against the backdrop of a challenging basis for comparison from the previous year, sales and operating profit declined in the first quarter despite double-digit increases in the Group s own retail business. Timing differences in the delivery of collections to wholesale partners had a significantly negative effect on this development. The reluctance of consumers to spend in key sales markets also had an adverse impact, as it did on many of our competitors. In many European markets, persistently recessionary macroeconomic trends are reflected in correspondingly subdued growth rates in our sector. Even in Asia, uncertainty among buyers is perceptible in our market segment. Despite this, we again increased our global comp store sales on a currency-adjusted basis. The trend in sales and earnings in the first quarter is largely attributable to the different timing of product deliveries, which will be reversed during the year. We are confident, most notably because of the expected increase in sales in the wholesale business, that we shall return to our long-term growth course in the second quarter. We shall, of course, continue to counteract the difficult market conditions with a policy of strict cost management. However, at the same time, we shall continue to invest in the attractiveness of our brands and our presentation to customers. In March, for instance, we opened a flagship store in Amsterdam, which will be followed by a number of additional projects in Europe and Asia in the next few months. These flagship stores will shape perception of our brands in the next few years. They create an ideal environment for the presentation of our collections, corresponding to the premium and luxury appeal of our collections. We are also seeing the positive effects of stricter control of our distribution in multi-brand environments. More and more retail partners are transferring responsibility for the HUGO BOSS brand presentation on their floors to us. In the first quarter we thus took over additional shop-in-shops from wholesale partners in Spain and Great Britain. Besides, we shall also manage our business in Singapore, one of the most important growth markets in Asia, independently in future following the takeover of our largest franchise partner s stores in August this year.

5 Letter to Shareholders 5 Ladies and Gentlemen, we expect the market environment to remain challenging over the further course of the year. We shall counteract this challenge by offering convincing collections and attractive shopping experiences. We therefore expect high single-digit increases in sales and operating profit for the year as a whole and see the Group remaining on course to achieve its medium-term targets. Sincerely yours, Claus-Dietrich Lahrs CEO and Chairman of the Managing Board

6 Key Figures 6 Key Figures Jan. March 2013 Jan. March Change in % Sales (2) Sales by segments Europe incl. Middle East and Africa (5) Americas Asia/Pacific (2) Royalties Sales by distribution channel Wholesale (14) Group's own retail business Royalties Results of operations Gross profit (1) Gross profit margin in % bp EBITDA (10) EBITDA before special items (11) Adjusted EBITDA margin in % (220) bp EBIT (14) Net income attributable to equity holders of the parent company (13) Net assets and liability structure as of March 31 Trade net working capital (5) Non-current assets Equity Equity ratio in % Total assets 1, ,453.5 (2) Financial position Free cash flow (29) Net financial liabilities (as of March 31) (12) Capital expenditure >100 Depreciation/amortization Total leverage 3 (as of March 31) (10) Additional factors for success Employees (as of March 31) 11,815 10,986 8 Personnel expenses Number of Group's own retail stores Shares (in EUR) Earnings per share Ordinary share (13) Preferred share 1.37 Last share price (as of March 31) Ordinary share Preferred share Number of shares (as of March 31) Ordinary shares 70,400,000 35,860,000 Preferred shares 34,540,000 1 Certain amounts shown here do not correspond to previous year figures and reflect adjustments made (as detailed in the Condensed Notes to the Consolidated Interim Financial Statements, Note 2 // Accounting policies). 2 EBITDA before special items/sales. 3 Net financial liabilities/ebitda before special items and expenses for the stock appreciation rights program.

7 HUGO BOSS on the Capital Market 7 HUGO BOSS on the Capital Market Following significant gains as of the end of 2012, the German share indices continued to rise in the new year. Above all, improved economic data and monetary policy stimulus from the United States allowed prices to rise despite resurgent concerns over economic stability in the euro zone. The HUGO BOSS share also posted significant share price gains in the first quarter of Share Price Performance 2013 (Index: December 31, 2012 = 100) January February March HUGO BOSS Ordinary Share DAX MDAX Positive performance on stock markets in first quarter After a healthy performance in the closing months of 2012, the German stock indices continued to grow in the first quarter of The avoidance of the fiscal cliff in the U.S., the recovery of global leading indicators and improved economic data from Germany, the U.S. and China supported price increases. As the quarter progressed, however, the markets were repeatedly weighed down by Italy s uncertain political future, the handling of the debt crisis in Cyprus and disappointing economic data from the euro zone. Double-digit increase of the HUGO BOSS share The ordinary share of HUGO BOSS AG began the first quarter of 2013 with price gains. After the positive trend at the end of last year, the share rose again sharply at the start of 2013 and reached a new all-time high of EUR in mid-march. Shortly after the publication of full year results 2012 the share price lost also against the DAX and MDAX. As of the end of the quarter, however, the shares posted renewed price gains and ended the first quarter up 10% as against the end of 2012 at EUR

8 HUGO BOSS on the Capital Market 8 The DAX and, in particular, the MDAX rose in value in the opening months of 2013 as well. Overall, the DAX and the MDAX climbed by 2% and 12% respectively in the first quarter. The shares of companies in the fashion and luxury goods industry also posted gains on average in the first three months of The MSCI World Textile, Apparel & Luxury Goods Index, which tracks the performance of companies operating in the area of apparel and luxury goods, rose by 4% in the first quarter. The performance of HUGO BOSS AG shares in the first quarter was therefore similar to or better than the German benchmark indices and fashion and luxury goods industry shares respectively. Weighting of HUGO BOSS share in MDAX increases In the Deutsche Börse ranking as of the end of March 2013, the HUGO BOSS ordinary share was ranked 15 th in the MDAX on the basis of free float adjusted market capitalization (prior to the consolidation of share classes, the HUGO BOSS preferred share had also ranked 15 th as of the end of March 2012). In terms of trading volume, the HUGO BOSS ordinary share ranked fifth (historic preferred share at the end of March 2012: 21 st ). Thus, at the end of March, the weighting of the HUGO BOSS ordinary share in the MDAX was 2.1% (weighting of the historic preferred share at the end of March 2012: 2.0%). An average of 139,018 ordinary shares were traded per day in the first quarter of The average number of ordinary and preferred shares traded per day in the first quarter of 2012 was 146,767. Voting right notifications in accordance with section 21 WpHG and section 25a WpHG In accordance with section 21 of the Wertpapierhandelsgesetz (WpHG German Securities Trading Act), shareholders are required to report the level of their shareholdings if they exceed or fall below certain thresholds. The reporting thresholds are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. The Company did not receive any such notifications in the January 1 to March 31, 2013 reporting period. On January 24, 2013, HUGO BOSS AG was informed by Mediobanca Banca di Credito Finanziario S.p.A., Milan, Italy, in accordance with section 25a WpHG that it no longer holds any financial or other instruments that could enable it to acquire voting rights. The Company published this notification verbatim on its website in the Investor Relations section under News and Releases. Shareholder structure unchanged At the end of the first quarter of 2013, the shareholder structure of HUGO BOSS AG was unchanged as against the previous year: 65.56% of shares are held by Permira Holdings Limited through Red & Black Holding GmbH and 1.97% of the shares are held by HUGO BOSS AG as treasury shares. The remaining 32.47% of shares are in free float. Reportable securities transaction in accordance with section 15a WpHG One reportable transaction in shares of the Company was reported to the Company by the Managing Board and the Supervisory Board in the reporting period from January 1 to March 31, In total, members of the Managing Board and the Supervisory Board hold less than 1% of the shares issued by HUGO BOSS AG. Reportable securities transactions are published on the Group s website in the Investor Relations section under News and Releases.

9 HUGO BOSS on the Capital Market 9 Higher dividend per share proposed HUGO BOSS pursues a profit-based dividend policy under which the shareholders participate appropriately in the Group s profit development. Between 60% and 80% of net income is to be distributed to the shareholders on a regular basis. On the basis of the significant increase in profits in fiscal year 2012 and the positive expectations for 2013, the Managing Board and the Supervisory Board intend to propose to the Annual Shareholders Meeting on May 16, 2013 a dividend of EUR 3.12 per ordinary share (2011: EUR 2.88) for fiscal The proposal corresponds to a payout ratio of 70% of net income attributable to the shareholders of the parent company in 2012 (2011: 70%). If the shareholders approve the proposal, the dividend will be paid out on the day following the Annual Shareholders Meeting, i.e. on May 17, Based on the number of shares outstanding at the end of the year, the amount distributed will total EUR 216 million (2011: EUR 199 million).

10 CONSOLIDATED INTERIM MANAGEMENT REPORT 2

11 Group Sales and Results of Operations 11 Group Sales and Results of operations GENERAL ECONOMIC SITUATION Mixed data from the global economy in the first quarter of 2013 Following the perceptible slowdown in the global economy at the end of last year, economic activity has not recovered to any sustainable extent in the first quarter of While economic output in the U.S. posted further moderate growth despite renewed budget cuts in the first quarter, growth rates in China in the first quarter lagged behind those of the previous quarter. In Europe, economic activity is still depressed by the debt crisis. The economic conditions for the HUGO BOSS Group therefore remain challenging. Euro zone still depressed by the debt crisis The euro zone remained in recession in the first quarter of Persistently high unemployment rates, weak industrial production data, subdued private consumption in many places as well as weaker export demand continued to dampen economic growth. The German economy performed comparatively better than the rest of the euro zone. Here, strong data from the construction industry, retail and the export economy was offset by somewhat weaker growth in industrial production. American economy grows moderately The American economy posted further moderate growth in the last quarter despite budget cuts and tax increases. The positive trends continued on the automotive and real estate markets, private consumer expenditure remained stable and the latest employment market data pointed to a slight recovery. Moreover, following the fiscal and political uncertainty at the end of last year, certain investment projects that had been postponed were implemented in the first quarter of Economic activity revived in Latin America in recent months and benefited, among other things, from the delayed impact of previous monetary easing. Patchy economic growth in Asia In Asia, economic activity was mixed in the first quarter of Relatively sound domestic demand was offset by still muted export activity. In China, economic growth at the beginning of the year slowed compared with the previous quarter. Despite the introduction of programs to stimulate the economy, the unstable economic environment at home and abroad depressed both private consumption and industrial production as well as export activities. In Japan, by contrast, the economy has been recovering in the first months of The upward trend was supported by extensive fiscal and monetary policy stimulus measures. Australian economic growth slowed due to weaker demand at home and abroad compared with the previous quarter.

12 Group Sales and Results of Operations 12 SECTOR PERFORMANCE Premium and luxury goods industry outperformed economy as a whole The positive growth trend in the global premium and luxury goods industry continued in the current fiscal year despite difficult economic conditions and a weak consumer environment in many key markets. Overall, the sector posted stronger growth than the economy as a whole. The consumer environment remained difficult in Europe on account of the persistent concern over the future of the euro zone. Robust growth in Eastern European markets partly compensated for weaker performances in Western and most noticeably Southern Europe. In the metropolitan regions of Western and Southern Europe especially, demand from tourists, predominantly from Asia, also supported market growth. In virtually all the region s markets, however, the long winter had a negative impact on demand for clothing. The industry expanded in America thanks to continuing positive consumer sentiment in the relevant market segment. This growth was supported by a stable performance at U.S. department stores and consistently strong consumer demand in South America. Demand for premium and luxury goods products remained subdued in Asia in the first quarter of The consumer environment remained difficult in China, in particular, with Hong Kong performing somewhat better on average than the Chinese mainland.

13 Group Sales and Results of Operations 13 Sales performance Sales development Sales in the first quarter slightly down on the previous year HUGO BOSS generated sales of EUR 593 million in the first three months of fiscal year 2013, which means that sales in Group currency, as in local currencies, were down 2% on the previous year's level (previous year: EUR 607 million). Changes to delivery cycles in preorder business led to a decrease in sales achieved with wholesale partners compared with the same quarter in the previous year. Double-digit sales growth in the Group s own retail business was not sufficient to compensate for this effect entirely. Takeovers of shop-in-shop units previously operated by Wholesale partners produced a shift in sales from wholesale business to the Group s own retail business. SALES BY REGION Jan. March 2013 in % of sales Jan. March 2012 in % of sales Change in % Currency adjusted change in % Europe (5) (5) America Asia/Pacific (2) 1 Royalties TOTAL (2) (2) 1 Including Middle East and Africa. Sales trend shows regional differences Sales in Europe including the Middle East and Africa amounted EUR 367 million and were consequently 5% down on the level of the previous year in both reporting currency and in local currencies (previous year: EUR 385 million). Key factors here were the changes to delivery cycles in the wholesale business, in particular, as well as the long winter. In the Americas, sales in reporting currency increased by 5% year-on-year to EUR 128 million (previous year: EUR 122 million). Sales growth of 6% was posted in local currencies in the first quarter. Continuing positive consumer sentiment in the relevant market segment supported this dynamic performance. After the first three months of fiscal year 2013, sales in Asia/Pacific in reporting currency were down 2% on the previous year's level, at EUR 86 million (previous year: EUR 88 million). This performance reflects the persistently difficult market environment in China in particular. In local currencies, sales rose by 1% as against the same period of the previous year.

14 Group Sales and Results of Operations 14 SALES BY DISTRIBUTION CHANNEL Jan. March 2013 in % of sales Jan. March 2012 in % of sales Change in % Currency adjusted change in % Wholesale (14) (14) Group s own retail business Directly operated stores Outlet Online Royalties TOTAL (2) (2) Changes to delivery cycles and takeovers dominate sales development in the wholesale channel In the first quarter of 2013, sales in the wholesale channel in both reporting currency and in local currencies were down 14% on the level of the previous year and totaled EUR 302 million (previous year: EUR 350 million). Firstly, compared with the same quarter in the previous year, a greater proportion of the current spring collection was delivered to wholesale partners in the fourth quarter of fiscal year 2012 in Europe in particular. Secondly, there is a shift in sales in favor of the second quarter due to the boost to wholesale partners' budget favoring the summer collection delivered in this quarter. The takeover of shop-in-shops previously operated by franchisees, particularly in Spain, Switzerland and China, also caused a shift in sales from the wholesale business towards the Group s own retail business. Replenishment, with which HUGO BOSS can react to short-term surges in demand from trading partners, posted a stable performance in the past quarter. The share of the wholesale channel in sales decreased from 58% in the same period of the previous year to 51% in the reporting period. In the Group s own retail business, double-digit growth rates were achieved in the first three months of fiscal year 2013, as in previous years. The expansion of the store network enhanced by the opening and takeover of new stores and the continuing professionalization of retail activities led to an increase in sales of 14% in reporting currency to EUR 279 million (previous year: EUR 244 million). This is equivalent to a 15% increase in sales after adjustment for currency effects. Sales from the Group s own retail business therefore amounted to 47% of total sales in the reporting period (previous year: 40%). Retail comp store sales increased by 1% year-on-year in Group currency and 2% in local currencies.

15 Group Sales and Results of Operations 15 Sales by retail format Sales from directly operated stores (DOS) increased by 12% to EUR 183 million (previous year: EUR 163 million) and 14% after adjustment for currency effects in the first quarter of fiscal year Therein included are sales of own freestanding stores as well as sales generated with concesseion partners. In the concession model the Group operates self-contained HUGO BOSS shop-in-shop units on the sales floor of the retail partner. Optimization of product arrangement, a raise in service quality and the acceptance of responsibility for the floor's replenishment constitute important leverage for an increase in selling space productivity. With sales growth of 17% in reporting currency to EUR 81 million, outlet stores also contributed to the positive development of sales in the retail channel in the first quarter of fiscal year 2013 (previous year: EUR 70 million). Adjusted for currency effects, this corresponds to an increase of 18%. Sales generated by the Group s own online stores increased by 28% in total in both reporting currency and in local currencies to EUR 14 million (previous year: EUR 11 million). Sales generated by the newly opened online store in China are included therein. NUMBER OF Group'S OWN RETAIL STORES Expansion focused on Europe in the first quarter of 2013 The total number of the Group s own retail stores increased by 36 in net terms to 876 in the first three months of fiscal year 2013 (December 31, 2012: 840). The Group's own retail network was strengthened in particular by the takeover of 31 stores previously operated by wholesale partners. This way, the concession model in Spain could be expanded among other things. In addition, the Group continued its expansion strategy through 14 organic new store openings in the first quarter. This was balanced by nine closings in the same period development OF group's OWN RETAIL STORES December 31, 2012 Europe 1 Americas Asia/Pacific Closings March 31, ( 9) Including Middle East and Africa. In Europe in particular, the retail network was further strengthened by the takeover of 31 shop-in-shop units from wholesale partners as well as through ten new openings. Here, the Group expanded its presence in the Spanish and British markets in particular. Taking into account two closings, there was a net rise in the number of retail stores in Europe of 39 to currently 508 (December 31, 2012: 469). The number of directly operated stores in the Americas rose in the past quarter as a result of the opening of the HUGO store in San Diego to currently 148 stores at the end of the quarter (December 31, 2012: 147).

16 Group Sales and Results of Operations 16 Two new stores in China and an additional store in Australia were added to the store network in Asia/Pacific in the first quarter of fiscal year Taking account of the closure of seven locations in this region, the number of directly operated stores stood at 220 at the end of the quarter (December 31, 2012: 224). ROYALTY SALES Royalty business developed positively in the first quarter of Products manufactured by partners include fragrances, eyewear, watches, children's fashion, motorcycle helmets, cell phones, mobile accessories and home textiles. Sales with external licensees increased by 6% as against the previous year to EUR 13 million (previous year: EUR 12 million). Substantial growth was generated in sales with licensees for fragrances and eyewear in particular. SALES BY BRAND In the first quarter of fiscal year 2013, the core brand BOSS posted a decrease in sales of 1% in comparison with the same period in the previous year. The brands BOSS Green and BOSS Orange were also down on the level of the previous year, by 3% and 10% respectively. By contrast, the brand HUGO posted sales growth of 4% compared to the previous year. In the past quarter, Menswear sales were 2% down on the level of the same period in the previous year and totaled to EUR 532 million (previous year: EUR 542 million). This corresponds to a 90% share of total sales (previous year: 89%). Womenswear sales were 5% down on the level of the same period last year at EUR 62 million (previous year: EUR 65 million). Womenswear sales therefore accounted for 10% of total sales (previous year: 11%).

17 Group Sales and Results of Operations 17 Earnings development Income statement Jan. March 2013 in % of sales Jan. March in % of sales Change in % Net sales (2) Cost of sales (213.9) (36.0) (224.2) (36.9) 5 Direct selling expenses (12.5) (2.1) (12.5) (2.1) 0 Gross Profit (1) Selling and distribution expenses (199.0) (33.5) (189.2) (31.2) (5) Administration costs and other operating income/expenses (56.7) (9.6) (51.5) (8.5) (10) Operating result (EBIT) (14) Interest income/expenses (3.8) (0.6) (3.3) (0.5) (15) Other financial items (1.2) (0.2) (0.9) (0.1) (33) Financial result (5.0) (0.8) (4.2) (0.7) (19) Earnings before taxes (15) Income taxes (24.4) (4.1) (30.0) (4.9) 19 Net income (14) Attributable to: Equity holders of the parent company (13) Non-controlling interests (69) Net income (14) Earnings per share (EUR) 2 Common share (13) Preferred share EBITDA (10) Special items EBITDA (0.1) EBITDA before special items (11) Income tax rate in % Certain amounts shown here do not correspond to previous year figures and reflect adjustments made (as detailed in the Condensed Notes to the Consolidated Interim Financial Statements, Note 2 // Accounting policies). 2 Basic and diluted earnings per share. 3 Preferred shares were converted into ordinary shares on 15 June, 2012 after stock market trading.

18 Group Sales and Results of Operations 18 Notes to the income statement Gross profit margin rises to 61.8% In the first three months of fiscal year 2013, the gross profit margin increased by 80 basis points to 61.8% (previous year: 61.0%). This positive development is mainly due to the expansion of the Group's own retail business and the positive development of the royalty business. Higher discounts in the wholesale business and in the Group s own retail business partly offset this effect. At the end of the first quarter of 2013, with EUR 367 million, the gross profit was almost on the previous year s level (previous year: EUR 370 million).. Expansion of Group's own retail business causes higher distribution expenses At EUR 199 million, selling and distribution expenses were up 5% on the previous year's figure of EUR 189 million in the first three months of fiscal year In relation to sales, selling and distribution expenses rose from 31% to 34%. As a result of the global expansion in the Group's own retail business in particular, distribution expenses increased by EUR 19 million in the first quarter of 2013 and were therefore up 16% on the previous year's level. This includes the additional expenses for net 36 new locations in the reporting period within the global expansion of this distribution channel. Marketing expenses decreased by 14% as a consequence of a modified distribution of the marketing budget over the year. In relation to sales, logistics expenses were reduced from 5% to 4% as against the same period of the previous year. This was aided by the optimization of global warehouse capacity initiated in fiscal year Allowances for doubtful accounts and bad debt losses played only a minor role in the 2013 reporting period thanks to the ongoing systematic receivables management. Administrative costs up year-on-year as a percentage of sales At EUR 57 million, administrative expenses and the balance of other operating income and expenses were up 10% on the previous year's level in the first three months of fiscal year 2013 (previous year: EUR 52 million). In relation to sales, administrative expenses and the balance of other operating income and expenses rose from 8% to 10%. As a result of the increased personnel expenses in particular, the research and development costs incurred to create the collections rose by 11% or EUR 2 million in absolute terms to EUR 16 million (previous year: EUR 14 million). As in the same period of the previous year, special items did not play a role in the reporting period. The internal performance indicator EBITDA before special items decreased by 11% compared to the same period in the previous year to EUR 133 million (previous year: EUR 148 million). The adjusted EBITDA margin fell by 220 basis points year-on-year to 22.3% (previous year: 24.5%). The improvement in the gross profit margin did not fully offset the higher operating expenses in distribution and marketing as well as in administration. Depreciation and amortization increased by 17% as compared to the previous year's level to EUR 21 million (previous year: EUR 18 million). This was due to greater investment intensity for the Group's own retail business. EBIT amounted to EUR 111 million in the first quarter of fiscal year 2013, down 14% on the previous year's figure (previous year: EUR 129 million). As the total of net interest income less other net financial income, the financial result fell by EUR 1 million to EUR 5 million (previous year: EUR 4 million). Net interest expenses rose by 14% compared with the same period in the previous year to EUR 4 million (previous year: EUR 3 million). This is mainly attributable to lower interest income from time deposits because of the low market interest rate. The other financial items amounted to a net expense of EUR 1 million and consequently matched the previous year s figure of a net expense of EUR 1 million.

19 Group Sales and Results of Operations 19 Earnings before taxes thus fell by 15% to EUR 106 million (previous year: EUR 125 million). At 23%, the tax rate was 1% below the previous year's level of 24%. Regionally different profit share of the domestic and foreign subsidiaries of the HUGO BOSS Group in connection with slightly decreasing international corporate tax rates led to a reduction of the Group tax rate. Net income 14% down on the level of the previous year Net income in the first quarter of fiscal year 2013 was 14% down, at EUR 82 million, on the previous year s figure of EUR 95 million. The net income attributable to equity holders of the parent company amounted to EUR 82 million, 13% lower than the previous year's figure (previous year: EUR 94 million). Non-controlling interests fell to EUR 0 million in the same period (2011: EUR 1 million) and primarily related to the 40% share held by the Rainbow Group in the "joint venture" companies in China. Earnings per ordinary share decreased by 13% year-on-year to EUR 1.18 (previous year: EUR 1.36). The conversion of preferred shares into ordinary shares became effective when trading closed on June 15, Since June 18, 2012, the HUGO BOSS shares are traded as registered ordinary shares via the electronic trading system XETRA, on the Frankfurt Stock Exchange and on all regional stock exchanges in Germany under the ticker symbol BOSS. Earnings per preferred share amounted to EUR 1.37 in the previous year.

20 Profit Development of the Business Segments 20 Profit Development of the Business Segments EuropE 02/02 Sales development Europe 02/03 Profit development Europe Jan.-March 2012 Jan.-March 2013 Jan.-March 2012 Jan.-March % - 10 % Sales in Europe including the Middle East and Africa amounted to EUR 367 million in the first quarter of the 2013 fiscal year, down 5% on the previous year s level in both reporting currency and local currencies (previous year: EUR 385 million). Sales performance in Europe impacted by changes in wholesale delivery cycles and long winter At EUR 94 million, sales in Germany were 3% below the previous year s level (previous year: EUR 97 million). The positive performance in the Group s own retail business was unable to fully offset the decline in the wholesale business caused by the change in delivery cycles. In France and Great Britain, meanwhile, the double-digit sales growth in the Group s own retail business compensated for the drop in sales generated with wholesale partners in the first quarter. Thus, sales in France matched the previous year s level at EUR 49 million (previous year: EUR 49 million). In Great Britain as well, sales were on par with the previous year at EUR 46 million (previous year: EUR 46 million). In local currency sales rose by 2% here. In the Benelux countries, sales were down 12% on the level for the same period of the previous year at EUR 42 million (previous year: EUR 48 million). Sales in the Group s own retail business in Europe increased by 19% in the past quarter to EUR 152 million (previous year: EUR 127 million). This corresponds to a rise of 20% in local currencies. Sales with wholesale customers declined by 17% over the same period to EUR 215 million in reporting and local currencies (previous year: EUR 258 million). This development was influenced significantly by the change in delivery cycles in preorder business. Takeovers of shop-in-shop units previously operated by wholesale partners resulted in a shift in sales from the wholesale business towards the Group s own retail business. Segment earnings down on previous year due to higher distribution and marketing expenses The segment profit of EUR 134 million in Europe was 10% below the previous year s level of EUR 149 million. Higher sales deductions especially in the Group's own retail business as well as higher selling and marketing expenses were not fully offset by the rise in the gross profit margin. The adjusted EBITDA margin therefore declined to 36.5% (previous year: 38.6%).