BERLIN — Even a double-digit decline in U.S. sales and a smaller drop in its home market couldn’t prevent Hugo Boss AG from generating a sales increase in the first half of 2002.

Group sales for the Metzingen, Germany-based fashion firm AG rose 3 percent to $524.3 million in the first six months of 2002. In the U.S., however, sales fell to $100.9 million for the period, an 11 percent drop that was 13 percent in local currency. Dollar figures are converted from the euro at current exchange rates.

As reported, net income for the first half of 2002 did not meet company expectations, falling by half to $29.4 million from $57.8 million in the comparable 2001 period. The decline was primarily attributed to nonrecurring pretax expenses of $10.8 million relating to inventory discrepancies in the U.S. that occurred in 2001, but were recorded in the first half of this year.

In the 2002 interim report released Wednesday, Boss reiterated its revised yearend projections, which called for sales to remain at approximately last year’s level of $1.07 billion with net income dropping to $68.6 million from $104.9 million in 2001.

In breaking down the sales picture, Boss noted that Hugo Boss sales declined 5 percent in Germany, the group’s most important market. The German retail sector has been caught in a downward spiral, with general men’s wear sales in the country down 10 percent. Boss said "there are currently no indications of a reversal in this market."

Overall European sales, however, were up 3 percent, with France generating a 17 percent increase, the U.K. a 9 percent gain and Spain a 19 percent uptick.

In the U.S., Boss said the earlier delivery of merchandise in Dec. 2001 and negative market conditions dampened sales substantially in the first quarter. Sales stabilized in the second quarter, and Boss management said it is "confident that sales will further stabilize and that the 13 percent sales decline — as calculated in local currency — will be partly offset in the second half of the year."

Sales rose 12 percent in Asia, currently the region with the strongest growth.

Hugo, the fashion label for younger men and women, booked a 17 percent sales gain for the period. Licensing income rose 26 percent to $28.4 million. Sales for Boss Woman were not specified, but the women’s division’s losses for the period were cut to $7.8 million from $8.8 million.During an analyst’s conference call, the company pointed out that 2002 is a transition year for Boss Woman. The division has been transferred to Metzingen from Milan and a new design team is in place, but the impact of the changes will not be seen in the market until 2003.

As reported, Boss is the target of a class action lawsuit filed in New York on July 23 in which the company was accused of falsifying records in connection with the status of its U.S. inventories. The company’s interim report contained a disclaimer, similar to those used by publicly held firms in the U.S., warning that "forward-looking statements contain risks."

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