Good morning,

Weakness in Hugo Boss this morning is due mainly to the fact that Socgen downgraded the shares from a BUY to a HOLD. Socgen kept its price target unchanged at E110/share.

The bottom line is that Socgen don’t see a 10% capital gain as being enough reward for the risk and investor is taking whereas we are comfortable with a 10% return on the stock in 2014.

From our point of view, we take this opportunity as a sign to BUY on weakness taking the bet that Hugo Boss’ success in China will come in sooner rather than later. Our reasoning is as follows:

• The market is pro cyclical stocks at the moment and we see this continuing throughout 2014

• Economic date in Europe and the US is coming out better than expected and companies like Hugo Boss benefit. Although China’s economic data is coming out weaker than expected, it came at a time when the Group is spending capital to grow its business. We are confident that the improvement in the developed world will improve data in China, benefitting the company as it strives to grow is top line and improve margins.

• Although Hugo Boss is growing in China, we don’t have certainty on ‘by how much’. However we are confident that management is doing what needs to be done to get the company there.

Conclusion: BUY on weakness.

Good day and happy trading!

Kristian Camenzuli