External factors influence development of business
Economic and sector-specific developments influence the development of operations and the financial position of HUGO BOSS. It is therefore imperative for the Group to detect such trends early in order to respond quickly with suitable measures.
Brighter prospects for global economic growth despite existing risks
For 2014, the IMF expects the growth of the global economy to pick up to 3.6%. Reduced pressure to deleverage in many key economies, consensus from central banks to only gradually phase out their monetary stimulus measures and an acceleration of world trade should support the economic upswing. However, there are still risks for global economic growth from the failure to introduce structural reform in some emerging countries and related exchange rate turbulence as well as the still high levels of debt in many European countries and in the United States.
European economy returns to growth
According to estimates of the IMF the European economy will return to a growth path in 2014 and expand 1.0%. An easing of government austerity measures, the recovery of export activity globally and within Europe, increased capital expenditure and a slight recovery of private consumption are expected to fuel growth. Sluggish reform efforts, the still high level of debt in many countries of the region together with a strong euro still pose risks to the economic recovery, however. Nevertheless, the IMF anticipates that growth in Germany will again outpace the rest of the region on average in 2014. Here, impetus will stem from domestic demand, which is expected to deliver a robust performance thanks to a stable labor market, wage increases and a lower savings ratio. Growth in France is expected to accelerate to 1.0% on the back of the global economic recovery. However, the economy there still faces a headwind from the slow implementation of economic reform. In Great Britain, economic growth of 1.9% is anticipated, mainly due to increasing capital expenditure and positive impetus from the export sector.
Economy in the Americas continues to pick up
For the United States, the IMF expects economic growth to accelerate to a rate of 2.8% in 2014. Continued expansionary monetary policy, a further improvement of the labor market and increasing wages should support economic growth in the form of a recovery of private consumption and increased investment activity by companies. According to the IMF the Latin American economy should grow by 3.1% in 2014 and thus slightly faster than in the prior year. Particularly the Mexican economy will contribute to growth in the region. This trend is expected to be supported by the continued recovery of foreign demand, especially from the United States. In contrast, growth in the key markets of Brazil and Argentina will be further encumbered by failure to implement structural reforms and high production costs that place a burden on the competitiveness of these countries.
Further growth in Asia, but at normalized levels
The outlook for Asian economies has improved slightly in recent months. For the region as a whole, the IMF anticipates slightly faster growth of 6.5% in comparison to the prior year. For the Chinese economy, the IMF forecasts economic growth of 7.3%. This implies slower growth than in the prior year but roughly matches the growth targets of the Chinese government (up +7.5%). The forecast is based, however, on assumptions that world trade will recover and that further reforms will be implemented with a view to stimulating private consumption and economic liberalization of that country. The upcoming increase in VAT in Japan could have a temporary negative impact on economic development there. The weak yen should on the other hand further drive exports and therefore economic developments on the whole. In Australia, growth rates should accelerate on account of a slight upswing in private consumption and a recovery in the export sector, among other factors.
Ongoing industry growth in 2014
For 2014, continued growth is anticipated in the premium and luxury goods industry. According to Altagamma and Bain & Company, however, growth is likely to slow slightly to low- to mid-single digits after currency adjustments. It is anticipated that companies operating in this sector will primarily focus on their own retail activities. The number of new stores opened is expected to fall in comparison to prior years, however. Instead, a large number of market participants will concentrate on upgrading existing stores to improve the shopping experience and achieve higher productivity levels. Increasing importance will be placed on online distribution channels and integrating them into brick-and-mortar retail operations. On the other hand, department stores and specialist multi-brand retailers, that are still often owner operated, will come under pressure.
In 2014, all regions are expected to contribute to growth in the industry. Tourism, in particular from Asian countries, will in this respect bring about a shift in sales primarily in favor of the European and U.S. markets. Despite the gradual improvement in the economic environment in Western and, in particular, Southern Europe, industry growth in Europe will continue to suffer in many places from declining customer traffic of retail stores. This should, however, be offset by robust growth first and foremost in the emerging economies of Eastern Europe and the Middle East. In the Americas the industry outlook remains positive in light of upbeat consumer sentiment in the United States and ongoing sound growth in Latin America. Despite normalizing growth rates, the strongest growth for the industry continues to be forecast for Asia. The slowing rate of growth in the Chinese economy and the continuing anti-corruption campaign on the part of the Chinese government are likely to exert a dampening effect on local demand for luxury goods. Chinese consumers will also contribute to growth in the luxury goods industry in the form of tourism once again in 2014, however. The upcoming increase in VAT in Japan will probably initially have a negative impact on industry growth. The weakness of the yen is likely, however, to dampen tourism and thus tend to shift demand back into the local economy.