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.
Only slight upturn in economic growth expected
The IMF projects the growth of the global economy to accelerate only marginally to 3.5% in 2015, with the economies of both the industrialized nations and the emerging markets expected to pick up. The upswing in the U.S. could prove to be the driving force for global economic growth. The sharp decline in the oil price as well as receding fiscal strains in many of the large economies together with the still accommodative monetary policy should support the prospects for growth. However, the absence of structural reforms, muted capital and consumer spending and sustained geopolitical tensions are placing a damper on global economic expansion. As well as this, the persistently high levels of debt and historically low inflation rates in Europe could also pose a threat to growth.
European economy on a course of moderate recovery
According to the IMF, Europe will grow by 1.2% in 2015, spurred by easing government austerity measures and sustained low interest rates. Thus, the ECB will be implementing substantial quantitative easing measures from the first quarter. Moreover, the recent decline in oil prices and the depreciation of the euro should have a positive effect on the region’s economy. In addition to this, the EU Commission as well as various individual countries have adopted economic stimulus programs. On the other hand, faltering reforms, – to pare back bureaucracy and to render job markets more flexible, for example – the continued heavy public-sector debt of many countries in this region, historically low inflation rates and, related to this, fears of deflation as well as persistent geopolitical strain harbor risks for the economy. Numerous parliamentary elections as well as the political situation in Greece could also exert pressure. For Germany, the IMF expects expansion of 1.3% in 2015. Assuming that economic reforms are implemented, growth in France should pick up as the year progresses, coming to a total of 0.9%. Economic growth in Great Britain is expected to remain largely unchanged at 2.7%.
The U.S. economy driving global economic growth
The economic upswing in the U.S. should also continue in 2015. According to the IMF, full-year growth should accelerate to 3.6% in 2015. Robust domestic demand, a further increase in capital spending in the corporate sector, favorable conditions in the job and real estate markets as well as increased government spending should fuel economic growth. Against the backdrop of stable economic conditions, the U.S. Fed is likely to raise its interest rates in the course of the year. However, the appreciation of the U.S. dollar and the faltering recovery of other markets outside the U.S. could place a damper on the export sector. The outlook for the Latin American economy is being dragged down by the decline in oil prices and other commodities. For this reason, the IMF expects growth of 1.3% in 2015, i.e. largely unchanged over the previous year. That said, the region should benefit from strengthening demand from the United States and progress on implementing economic reforms.
Stable economic growth in Asia
According to the IMF, the Asian economy (excluding Japan) will grow by 6.4% in 2015, and, hence, more slowly than in the previous year. Slipping momentum in China and persistently muted demand in Europe is expected to exert a drag on the economy. On the other hand, the region will benefit from rising demand in the United States. What is more, many of the countries in this region exhibit a solid domestic economy and are reaping the benefits of the fiscal, monetary and structural reforms of the last few years. The IMF calculates that Chinese growth will slow to 6.8% as a result of lower expansion in trade and manufacturing as well as the retarding effects of previous excess investment in the real estate sector. In Japan, economic growth is expected to accelerate to 0.6% in 2015, with expansionary monetary policy, declining oil prices and the weak yen likely to contribute to this. In Australia, growth rates should accelerate slightly over the previous year thanks to intact consumer spending and a recovery in the export sector among other things.
Continued industry growth in 2015
The premium and luxury goods industry is expected to continue growing in 2015. According to Altagamma and Bain & Company, growth in currency-adjusted terms will be in the mid-single digit percentage range and, hence, in line with the previous year. Improvements in overall economic conditions, low energy prices and increasing wages could provide impetus for growth as the year progresses. It is anticipated that, as in the previous year, companies operating in this sector will primarily focus on their own retail activities. The number of new stores opened will probably continue decreasing in comparison to prior years. Instead, many market participants will be investing in 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, which are often owner-operated, will remain under pressure. Many retailers are feeling the effects of declining footfall and rising rents. Accordingly, market consolidation is likely to continue in this channel.
In 2015, all regions are expected to contribute to growth in the industry. In Europe the sector should benefit from a gradual recovery in local demand and particularly also from growth in business with tourists, particularly from Asia. The gradual recovery in economic growth is likely to primarily have a positive effect in the Southern European countries of importance for the luxury goods sector. That said, muted consumer confidence in many markets and declining footfall in the retail sector will continue to exert pressure. In Eastern Europe, the sector is likely to suffer from the political tensions emanating from the Ukraine conflict. This will probably also cause the number of Russian tourists in Western Europe to decline, thus exerting pressure on demand in these markets. In the Americas, the luxury goods sector should remain robust in 2015, benefiting from the general recovery in the economy, the resultant high consumer confidence and rising local consumer spending in the United States. Mounting demand from Asian tourists will also spur business in the Americas, although the strong U.S. dollar could exert a drag on this trend. By contrast, growth is likely to be somewhat weaker in Latin America due to still muted consumer confidence. Experts project further expansion for the sector in Asia. However, low growth at best is anticipated for China. The Chinese government’s anti-corruption campaign, which is having an adverse effect on the social acceptance of premium and luxury brands, the slowdown in economic growth and sharply falling real estate prices will have a negative impact here. Supported by the appreciation of the local currency, Chinese customers will buy an increasing proportion of luxury goods abroad. In Hong Kong as well sector growth will likely remain muted. The Japanese market should continue to benefit from healthy demand on the part of domestic consumers alongside purchases by tourists.