External risks

Macroeconomic risks

Like any company with global activities, the HUGO BOSS Group is exposed to risks arising from the uncertainty of future developments of macroeconomic conditions. A decisive factor in this context is the development of the global economy, which can lead to reduced demand for apparel and accessories in the premium and luxury segments. Its dependence on consumer behavior exposes the consumer goods industry in general to risks that can impact budgeted sales and/or margins. The effects of macroeconomic developments can occur globally or in individual markets, and can have knock-on effects. However, the advance order intake and the development of the Group's own retail business, provide the HUGO BOSS Group with early warning indicators that permit an early forecast of the consequences of potential macroeconomic risks. The HUGO BOSS Group has taken several measures to mitigate the impact of turns in the business cycle. This includes a clear brand profile geared towards the expansion of the market share in a highly competitive environment. A business model designed for international growth also taps the potential of new consumer groups and serves to compensate for potential decreases in demand in individual markets. A further objective is to achieve a balanced distribution of sales across different regions to avoid overdependence on individual markets. Looking at fiscal year 2014, the Group generally expects the continued growth of the global economy and the premium and luxury industry. Adverse macroeconomic developments can impact planned business growth, however, regardless of the measures taken. In light of continuing uncertainty in connection with the euro debt crisis and the final settlement of the budget dispute in the United States, management deems the potential financial consequences to be significant. The probability of occurrence of such a strong effect on global demand is considered to be unlikely, however. Subsequent events and outlook, Outlook

Sovereign risks

A company with international activities, HUGO BOSS is also exposed to risks in connection with the development of individual sales markets. This risk can be triggered by changes in the political or regulatory environment or by socioeconomic developments. As is the case with any company, the Group’s net assets, financial position and results of operations are exposed to the risk of terrorist activities and natural disasters. To keep sovereign risks as low as possible, HUGO BOSS products are sold for the most part in countries with stable economic and political conditions. At present the Managing Board considers major changes to the regulatory environment in the key sales markets of the HUGO BOSS Group to be unlikely. In addition, global distribution in more than 120 countries at Group-level provides a natural hedge against adverse developments in individual markets. Consequently, the Managing Board estimates the financial impact of an unexpected change in country-specific conditions to be minor.