Results of operations

Sales development

Sales of HUGO BOSS AG rise by 8%

In fiscal year 2014 the sales of HUGO BOSS AG increased by 8% to EUR 1.155 million (2013: EUR 1.067 million). This performance was aided by higher sales both in the Group’s own retail business and in that with wholesale partners. The positive development of sales generated by the subsidiaries in the Group’s own retail business also contributed to the rise in sales.

Regional sales performance (in %)

In Europe (including the Middle East and Africa), sales with subsidiaries of HUGO BOSS AG increased in fiscal year 2014 by 3% to EUR 397 million (2013: EUR 387 million). Sales with third parties increased by 9% to EUR 474 million in the same period (2013: EUR 436 million). Sales outside Germany and Austria were mainly generated with subsidiaries.

Sales of HUGO BOSS AG with subsidiaries in the Americas increased by 30% to EUR 189 million (2013: EUR 145 million). In the Asia/Pacific region, on the other hand, HUGO BOSS AG experienced a decrease in sales from 5% to EUR 95 million (2013: EUR 100 million).

Sales of the BOSS brand, including the brand lines BOSS Orange and BOSS Green, rose by 8% to EUR 1.019 million (2013: EUR 940 million). The HUGO brand in fiscal year 2014 saw sales increase from 7% to EUR 136 million (2013: EUR 127 million).

Development of earnings

Gross profit margin increases by 100 basis points

At EUR 459 million; the gross profit was up 11% on the prior-year level (2013: EUR 413 million). The gross profit margin hence increased from 38,7% in the prior year to 39,7%. In addition to the further increase in the share of sales generated by the Group’s own retail business, efficiency gains in the production and sourcing activities aided this development.

Distribution costs rose in the past fiscal year by 9% to EUR 327 million (2013: EUR 299 million). This development mainly relates to the continued expansion of the Group’s own retail business. Increased sales in this distribution channel led in particular to increased expenses in connection with rental agreements linked to sales performance. Furthermore, intensified brand communication activities resulted in an increase in marketing expenses in comparison to the previous year.

General administrative expenses decreased by 6% to EUR 95 million (2013: EUR 101 million) and mainly comprised personnel expenses, rent for premises, lease expenses, amortization and depreciation as well as various IT costs. The decrease mainly stems from the lower amount of amortization charged on enterprise software.

Other operating expenses mainly comprise research and development costs, bad debt allowances and exchange rate effects and increased by 12% year on year to EUR 66 million (2013: EUR 59 million). The recalculation of additional intra-Group recharged expenses resulted in expenses relating to other periods of EUR 6 million (2013: EUR 0 million).

In the past fiscal year other operating income amounted to EUR 156 million (2013: EUR 132 million) and mainly breaks down into cost allocations and services rendered to affiliated companies. The recalculation of additional intra-Group recharged expenses resulted in income relating to other periods of EUR 14 million (2013: EUR 0 million).

Operating profit considerably up on prior year

Operating profit rose in particular thanks to the positive development of gross profit by 47% to EUR 126 million in comparison to the previous year (2013: EUR 86 million).

At EUR 228 million, income from investments in affiliated companies was up 16% year on year (2013: EUR 197 million). Income from investments in affiliated companies of EUR 89 million (2013: EUR 95 million) mainly concerns the net income of HUGO BOSS Trade Mark Management GmbH & Co. KG, which is transferred to and drawn from the loan account of HUGO BOSS AG as limited partner in accordance with the partnership agreement. Income from profit and loss transfer agreements pertains to income from profit and loss transfer agreements in place with subsidiaries of HUGO BOSS AG. In fiscal year 2014, this amounted to EUR 140 million (2013: EUR 102 million) and resulted from the transfer of profit from HUGO BOSS Internationale Beteiligungs-GmbH, Metzingen. In fiscal year 2014 this company received dividend income from HUGO BOSS Holding Netherlands B.V. In the past fiscal year, expenses from loss absorption were immaterial (2013: EUR 1 million). The expense for the prior year related to the loss absorbed by HUGO BOSS Beteiligungsgesellschaft mbH, Metzingen.

The interest result as a net expense (other interest and similar income less interest and similar expenses) decreased in fiscal year 2014 to EUR 7 million (2013: EUR 11 million). This change primarily reflects the lower level of borrowing and the repayment of financial liabilities due to HUGO BOSS International B.V.

Income before taxes in fiscal year 2014 came to EUR 347 million (2013: EUR 272 million). The increase was the result of the higher operating profit as well as higher income from profit and loss transfer agreements.

At 16%, the effective tax rate was well below the prior-year level (2013: 22%). The dividend income contained in profit transfers and income from a foreign “joint venture” had a positive effect on the effective tax rate. By contrast, expenses from income taxes relating to other periods of EUR 2 million (2013: EUR 16 million) increased the effective tax rate. As in the previous year, the income taxes relating to other periods mainly stem from the recognition of a provision for risks in connection with the tax field audit for the years 2007–2011 including subsequent effects.

Net income rises by 38%

At EUR 292 million, the net income for fiscal year 2014 was thus up 38% on the prior-year level (2013: EUR 211 million).