Thank you for standing by, and welcome to the Hugo Boss first half year results 2015 conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question and answer session, at which time, if you wish to ask a question, you will need to press star and one on your telephone. I would now like to hand the conference over to your speaker today, CEO, Mr. Mark Langer. Please go ahead, sir.
Good afternoon, ladies and gentlemen, and welcome to our first half year 2015 financial results presentation. Let me start my presentation with a review of financial performance in the last six months. Overall, group sales increased by 12% in the first half year and amounted to EUR 1.3 billion. Adjusted for currency effects, revenues were up 5%. In Europe, sales were 5% above the prior year level due to double-digit growth in own retail. Up 11% on a currency-adjusted basis, the U.K. continued to be the region's fastest expanding core market. In Germany and France, sales momentum in own retail picked up over the course of the period. Both markets generated growth of 5%. Revenues in the Americas were 3% higher compared to the prior year in local currencies. Growth in own retail more than offset a low single-digit decline of wholesale sales. The key U.S. market was up 2%.
Asia Pacific recorded a 3% sales improvement in currency-adjusted terms. China grew 1%. Australia and Japan performed much stronger, generating growth of 13% and 6% respectively. In the second quarter, momentum accelerated across all regions, particularly in Europe. Here, growth picked up in almost all markets. Sales in the Americas benefited from improvements in Canada as well as Central and Latin America, while the U.S. market remained lackluster. Asia recorded a better second quarter as well. This was due to continued good momentum in Australia and Japan, as well as takeover effects in Korea and China. In both cases, however, performance was below initial expectations as a result of the outbreak of the MERS disease and the challenging market environment on the Chinese mainland, respectively. In addition, sales development in Hong Kong deteriorated due to further weakening customer footfall.
Excluding takeover effects, the Asian business was up 1% in the second quarter. This compares to 5% in reported currency-adjusted terms. In the first half year again, global tourism flows did shift demand between the regions. For example, our business with Chinese travelers in Europe increased by more than 50% in the first six months, including a doubling of sales in Italy. Chinese customers have now become the most important foreign consumer group in our European business, overtaking visitors from Russia. However, keep in mind that our overall tourism exposure continues to be lower compared to some of the pure luxury brands, with tourism accounting for less than 15% of retail sales in Europe. By distribution channel, first half year own retail revenues were 9% above last year's level. Online was the best-performing retail format, recording a 23% improvement.
The outlet channel outperformed full price distribution as a result of strong consumer demand in Asia in particular. Retail sales increases were driven by new openings and takeovers, as well as comp store growth of 5%. Europe's comp store sales performance exceeded the group average, while the Americas and Asia trended in low single-digit territory in the first half year. Throughout the period, increases were driven by volume growth and, to a large extent, price mix improvements. The latter underlines our success in trading up consumers to higher price, higher value products in own retail. In the second quarter, comp store sales growth improved to 6%. This acceleration was almost entirely fueled by the region Europe, where momentum picked up across the board. The other two regions recorded performance in line with the first quarter.
A better full price business meant we were able to narrow the performance gap vis-à-vis the outlet channel in the second quarter. The latter, however, continued to generate increases above the group average in the second quarter as well. Supported by higher sales contribution from new space related to openings and the two takeovers discussed before, second quarter retail sales growth amounted to 12% in currency-adjusted terms. Wholesale sales declined by 2% in the first six months, with a slightly more negative takeover-induced performance in the second quarter. Finally, the group's licensed business was up 10% in the period, thanks to double-digit increases in eyewear and watches. Moving below the top line, first half-year gross margin remained unchanged, whereas the prior year level of 66%.
The positive mix effect from above average growth in own retail was offset by higher rebates in this channel, as well as negative inventory valuation effects. The latter reflects the adjustment of inventory book values in anticipation of future discounts necessary to clear the merchandise. In the second quarter, the gross profit margin declined by 20 basis points as higher rebates related to the clearance of prior season merchandise, predominantly in the Americas, and negative inventory valuation effects, though smaller than the first quarter, weighed on margin development. These factors more than offset the positive channel mix effect. First half year cost development reflects the impact from currency as well as continued investments in retail, marketing, and organizational strength. Selling and distribution expenses were up 16%. In addition to a double-digit increase of marketing expenses, retail expansion and refurbishments had a significant impact on cost development.
The takeovers in China and South Korea, as well as several large-scale renovation projects executed in the first half year, many of them including at least temporary store closures, diluted margins. On a like-for-like basis, however, retail profitability improved. G&A expenditures growth was mainly related to the ongoing strengthening of retail processes, systems, and competencies throughout the Group, reflecting the Group's continued transformation towards a strictly consumer-focused business model. The other operating income and expense line, in which we book special items, had a neutral impact on profit development in the first six months. A mid-single digit million EUR positive effect from the successful divestiture of our U.S. production facility in Cleveland was compensated by charges related to early contract terminations with sales agents and service providers, as well as organizational changes in Europe and the Americas.
EBITDA before special items grew 6% to EUR 255 million, resulting in a margin decline of 120 basis points in the first half year. Taking into account higher depreciation charges, Group EBIT was up 3%. Net income attributable to shareholders improved 2% to EUR 146 million, translating into earnings per share of EUR 2.12. Currency translation effects contributed positively to Group profit development. On a segment level, however, the impact differed by region. In Europe, negative currency effects related to the non-euro-denominated portion of sourcing in connection with higher sales and marketing expenses exerted margin pressure. In the Americas, however, positive currency effects overcompensated the effects from higher rebates in particular, so that operating margin improved by 190 basis points. In Asia Pacific, finally, depressed retail performance in the region's key market, China, margin dilution from takeovers, and investments in retail and marketing drove an overall profitability decline.
Let us now turn to the balance sheet. At the end of the first half year, trade net working capital was up 18% in reported terms and 5% in local currencies. Inventories rose 15%, or 4% excluding exchange rate effects. This represents visibly slower growth compared to the end of the first quarter, when we recorded a double-digit currency-adjusted increase. Nonetheless, we will be working towards further improvements in the second half year. This is particularly true for the Americas, where stock levels continue to be too high. Receivables were up 1% in euro terms and down 6% in local currency, in line with the sales trend in our wholesale business. Finally, trade payables were down 7% in currency-adjusted terms, reflecting a slightly different timing of production compared to the prior year.
In line with our guidance, investments increased compared to the prior year and amounted to EUR 87 million in the period. Beyond regular retail openings and refurbishments, the increase was primarily a result of the 2 takeovers in Asia, for which the acquisition price amounted to EUR 21 million. In addition, we made a low double-digit million euro investment in the relocation of our New York City showroom. Higher CapEx more than offset operating cash flow improvements so that free cash flow declined to EUR 73 million year to date. As a consequence, net debt was slightly above the prior year level at the end of the period. Please remember that cash flow generation at Hugo Boss is skewed towards the second half year owing to the seasonality of our business. We do expect net debt to be virtually zero at the end of the year.
With this, let me update you on our most recent progress in the different pillars of our growth strategy, BOSS Brand Elevation, womenswear, owned retail and omnichannel, as well as global growth opportunities. Starting with the first one, the brand elevation process outlined earlier this year is progressing as planned. In own retail, we are focusing on the BOSS core brand more and more exclusively. In new and refurbished stores, floor space will be increasingly dedicated to our core brand alone. Across its offering, we are gradually elevating the product mix through a stronger emphasis on BOSS tailored and BOSS made to measure. As outlined in my discussion of year-to-date like-for-like sales performance, this strategy is supporting mid-single-digit increases of overall average selling prices in directly operated stores. Keep in mind that this reflects an upgrade of the offering rather than simple price hikes.
In wholesale, we are limiting the core brand distribution to shop-in-shops. Multi-brand areas, so-called category floors, will be served by the other three brand lines going forward, substituting the previous BOSS offering. In Germany, Austria, and Switzerland, this change has now been implemented across the vast majority of retail partners and many key accounts have upgraded BOSS distribution to a shop-in-shop format. While it is too early to report back on sell-out trends at our partners, order development for upcoming seasons and sell-in have been in line with our original expectations. In the seasons ahead, we will further optimize the HUGO and Boss Green collections in order to compensate for the planned discontinuation of certain entry price points in the BOSS core brand.
At the same time, we will be expanding the strategy to the rest of Europe with the delivery of the pre-spring 2016 collection later this year. In womenswear, our second growth pillar, we can report back on a successful first half year as well. Sales of our overall womenswear business were up 5% currency adjusted in the first six months of 2015. While Boss Orange and HUGO continued to suffer from the loss of retail space following our new format strategy, BOSS continued to outperform. Sales of our core brand, which account for around 65% of total womenswear sales, grew 12% in the first half year. This reflects the strength of the brand in tailored products in particular. At our upcoming September fashion show in New York, Jason Wu will take the upgrade and refinement of our collections one step further.
At the same time, we are strengthening and expanding our essentials business. The new fundamentals collection addresses the needs of the modern businesswoman looking for classic, timeless pieces she can flexibly combine with the seasonal collections. Visiting a Hugo Boss store today will also highlight the growing focus on shoes and accessories. As part of our fall 2015 collection, we launched a new iconic bag, the Boss Bespoke Bag. Capitalizing on made in Italy and using exquisite materials, it merges the menswear DNA of BOSS with more subtle femininity. From September onwards, customers will be able to personalize their bag, selecting from different colors and materials according to their own truly bespoke needs. While shoes and accessories are small categories for us at the moment, accounting for around 10% of womenswear sales, we acknowledge their importance when it comes to defining brand identity and driving desirability.
As a result, we are allocating more retail space to shoes and handbags. This is particularly true for 30 ambassador stores worldwide, among them Regent Street and Sloane Square in London, as well as our newly refurbished store in Frankfurt. Overall, we invested almost EUR 20 million in the renovation of existing stores in the first half year. In addition, we added almost 7,000 sq m of retail space in the first half year via new openings and takeovers, representing a 4% increase compared to the end of 2014. Europe was the focus region in terms of new openings. Important projects included the opening of a travel retail store at Milan Airport, the expansion of our retail presence in Moscow, and the opening of additional shop-in-shops at Galeries Lafayette in France. Takeovers related primarily to our former franchise businesses in Korea and China.
Looking out to the rest of the year, we now expect to open around 65 new stores and shop-in-shops in 2015. Among the additional opportunities identified most recently is the relocation of our Regent Street store in London to another building close by. Doing so will more than double net selling space to above 800 sq m in a better accessible, less complicated store layout. Finally, we have reached an agreement with El Palacio de Hierro, one of the leading department stores in Mexico, to take over 14 Hugo Boss shop-in-shops in the next month. Beyond physical retailing, we have made the implementation of an omni-channel business model one of the cornerstones of the group's strategy. In this context, we are encouraged by the pickup of momentum in our online business. In the first half year, online sales were up 23% in currency-adjusted terms.
In the second quarter alone, the increase amounted to 34%. This performance is a result of improvements we have implemented since around the same time last year. Based on the Demandware platform now fully controlled by us directly, we upgraded the store in terms of its look and feel, features, and usability. The relaunch of hugoboss.com and the now far more performance-driven approach to digital communication has driven a strong double-digit visitor increase. In addition, average order values improved at a high single-digit rate, underlining our success in upgrading product presentation and facilitating cross-selling, for example, through the promotion of entire campaign looks. At the same time, the preparation for the rollout of omni-channel is progressing as planned. As a reminder, we will in-source online fulfillment in the first half of 2016, a key prerequisite to offer consumers a seamless brand and shopping experience across all distribution channels.
Over the next few months, we will launch several innovations supporting consistent customer data management and personalized service, driven directly by the store personnel. Expect a comprehensive update on these initiatives at our investor day on November 24. Ladies and gentlemen, before finishing with our financial outlook, let me give you some insights into regional trading. Based on the recent acceleration of trends in Europe, we expect the region to grow solidly also in the second half year. Ongoing strength in the U.K., as well as improvements in Germany and France in particular, should drive sales. In addition to the recovery of domestic demand, increased travel flows, especially from Asia, will continue to support performance. In the Americas, we forecast trends to remain broadly similar to the first half year's level. A continuously promotional retail environment has made us take a very cautious approach to U.S. wholesale.
As a result, we are rather limiting sell-ins where necessary in order to improve full price sell-through. At the same time, we expect retail performance to start benefiting more significantly from merchandising and operational improvements only next year. Finally, we forecast mixed trends in Asia to continue. While Australia and also Japan should continue to perform well, we do not project the market environment in China and Hong Kong to recover anytime soon. As a result, we focus on building brand strength, in particular in men's formal wear, on upgrading our retail network, and on improving retail execution. The latter includes the strengthening of our retail management team, merchandising changes, and a stronger focus on CRM. Finally, we expect some stimulus from the collection upgrade, where we have just implemented in China, offering higher value product at unchanged price points.
To sum it up, group sales are expected to grow at a mid-single-digit rate on a currency-adjusted basis in 2015. Thanks to positive currency translation effect, increases will be higher in EUR terms. While wholesale sales are forecasted to decline slightly, our own retail business will grow stronger than the group average, thanks to productivity improvements and new space. Based on second quarter performance and current trading, we have even raised our outlook for retail comp store sales growth to mid-single-digit. Nonetheless, our operating profit forecast remains unchanged. Adjusted EBITDA is expected to grow by 5%-7% in reported terms, implying an operating margin decline also in the full year. Gross margin is expected to improve due to better channel mix, driven by solid increases in the second half year.
The flat gross margin development in the first six months means the full-year increase will be lower compared to the original expectations. We will also continue to invest in future growth. As a consequence of the upgrade and expansion of our own retail network, selling expenditures will increase more sharply than sales. In addition, marketing expenditures are expected to grow over proportionally. Finally, G&A cost development will reflect investments in people and systems, supporting the group's ongoing transformation to a consumer-centric business model. Based on our increased store opening outlook, as well as updated exchange rate assumptions, we have also upped our CapEx forecast. Investments will amount to between EUR 220 million and EUR 240 million in 2015, with the majority being related to own retail expansion, refurbishments, and takeovers.
Omni-channel investments, the expansion of our production facility in Turkey, and the relocation of our U.S. headquarters within New York City represent other important investment areas. Ladies and gentlemen, in the first half year, we faced a difficult operating environment. In Europe, the apparel industry has hardly benefited from the overall upswing in private consumption. In the Americas, industry trends have been mixed throughout the period. In China and Hong Kong, we have not seen light at the end of the tunnel yet. Given these challenging market conditions, we can be satisfied with what we achieved. First half-year financial results performance is in line with our full-year expectations, our confidence to reach 2015 targets has grown further. In an industry which is growing at a far slower pace compared to historical levels, at least at the moment, our operating environment has turned even more volatile and competitive.
This should not make us focus on short-sighted sales and profit maximization. We are convinced that our company's future rather depends on ensuring growth potentials for the long term. This is exactly what we're doing in the different areas of our strategy, even though this clearly comes at a cost. Nonetheless, the progress we are making, all of them, gives us confidence that Hugo Boss will continue to stand for its attribute with which consumers associate our brand first, success. I will now be happy to answer your questions.
Thank you. As a reminder, if you wish to ask a question, please press star and one on your telephone and wait for a name to be announced. If you wish to cancel your request, please press the hash key. Your first question comes from the line of Antoine Belge. Please ask the question.
Yes, good afternoon. It's Antoine Belge at HSBC. Three question, if I may. First of all, I think the big element in Q2 was the acceleration in Europe. Having said that, it seems that the ready-to-wear market didn't really improve. What did you do perhaps better in Q2 than you did in Q1? Second question, I think there were a lot of mention about markdowns. Is it possible to maybe have an idea of what type of products and maybe which region were involved? If you think that now you ended the quarter with a cleaner inventory situation and maybe what makes you confident that we should see less markdown in the second half? Finally, on your comments regarding Asian margin, it seems that the consolidation of the Korean business and also the most recent takeout in China is not really going as planned.
I understand that there are some external factors as well. Here, what can reasonably be done in the second half to try to improve that? Thank you.
Thank you, Antoine. I think there's not one silver bullet which set our performance in Europe apart from the first quarter. I think two of the elements that we also highlighted in our explanation have been key to that. One is the continuous effort that we were able to up-trade our consumers to higher price points, larger baskets in our retail network. It's a trend that we have been very much focusing on due to improved better in-store execution, staff training, better planning and buying process. This is clearly paying off that, in particular also to a domestic consumer, we are able to have a bigger, higher priced basket with these consumers.
This gives us, of course, also the confidence to rigorously pursue this core element of our strategy to elevate the BOSS brand to higher price points. Compared to brands which are even clearly operating at different price points than Hugo Boss, we clearly also benefited. I highlighted the Chinese consumers from non-domestic tourism. This probably has especially benefited our European businesses, especially in these markets where we are seeing above average tourism, for example, in France, in parts of Italy, but also in the U.K. Maybe to some expense to the U.S. operation where the strength in the US dollar might have driven some visitors rather to the European markets and not to the North American ones. When it comes to rebates and markdowns, I think we shared with you the impact on gross margin on the first quarter.
Clearly, we have been dealing with a situation with excessive inventory, in particular in North America, but to a lesser extent, also in Asia, where sales performance in China and Hong Kong clearly has been below our initial expectation for the last 12 months. We have started to address that with a more cautious buying plan for these two markets almost 12 months ago. We still have, in particular in the U.S., an overstock situation when it comes to fall-winter merchandise from 2014, which we are now planning to clear in a brand equity but also margin-optimized level over the next six to nine months. Clearly here we will benefit from a very professional and well-distributed factory outlet capacity that we enjoy, especially in the U.S. market.
Given that we have seen already some markdowns and rebates in the second half of 2014, we expect that the margin diluted impact on gross margin from rebates trends we have seen in the first six months will be far more subdued in the second half of the year. On the Asian market outlook, I think that was your third question. We try to phrase it, no reliable measurements yet on how far it is until the end of the tunnel. Current trends, also into the third quarter, continues to make us cautious on the trading trend that we see from Mainland China, in particular, from the northern part of the country, but also Hong Kong, which has deteriorated in terms of footfall in the second quarter. It does not give us, at this moment, the confidence to announce more positive market outlook at the time.
Maybe we will be able in beginning of November, after the third quarter performance, to see whether we've seen some improvement where there is a weak comparison base. Keep in mind that for the last two years, in China in particular, a weak former year reference base was not necessarily a strong reason to bet on improvement in the current fiscal. Against this background, we continue to be cautious in our market assumption, especially on Mainland China and Hong Kong.
Sorry, maybe a follow-up with regards to the takeover that you did. Is there any action that could be taken to try to mitigate the impact?
Well, in China, please keep in mind that the last remaining franchise partner was comparatively small. It represented just 5% on our Chinese business. Clearly, we see a significant benefit now to have 100% control on all B2C activities in China. As we have done with the JV takeover a year ago, where we have brought expertise from our 100% controlled business to the former JV operation, we are in the process to do the same with our last franchise partner. The impact, given the size of the business we have acquired in the first quarter, it is too small to have a significant impact for the remainder of the year.
Thank you.
Thank you, Antoine.
Thank you. The next question comes from the line of Chiara Battistini, JPMorgan London. Please ask your question.
Hello. Good afternoon. Thank you for taking my questions. First question, again on Asia and the profitability. I calculate in Q2, the margin was down 700 basis points or a bit more. How should we be thinking about the profitability for the second half? Sort of a similar drag or easing, at least? On the admin costs, I've noted admin costs in Q2 up 20%, if you could please comment on that. Finally, on increased openings guidance from 50 to 65, if you could tell us where those will be more focused on. Thank you.
Thank you, Chiara. Well, the decline in profitability, which continued or accelerated for our Asia Pacific business, was driven by the drag in the Greater China performance. On the one hand, we shared with you that we have now seen a continuous situation of negative like-for-likes on the Mainland, which cannot be compensated by any other means to that, given that there's no fixed cost adjustment that will compensate for that. We also had an unfortunate mix effect to that we have with the expansion with larger, more expensive in terms of depreciation and rental costs, flagship stores in Shanghai and Hong Kong. The fixed cost base from these stores has grown over proportionally.
Last but not least, the takeover that became fully effective in the second quarter, had also a dilutive impact, because the majority of our business relationship with our former franchise partner was already captured as part of the wholesale business. The fourth element, I think we mentioned that as part of the commentary, is that in this difficult market environment, we have not released our marketing and promotional activities. We have rather increased, especially CRM activities to drive customers to our store. Unfortunately, it didn't pay off, at least domestically, to the degree that we have initially hoped for. You might argue that some of these interest and awareness of the brand we created domestically in China paid off with these Chinese consumers coming to Europe or shopping outside of the country.
You're right in your observation that in the current circumstances, we have seen a significant decline, especially in local currencies, in the Mainland China performance. The admin cost increase in the second quarter is predominantly driven by further expansion of our global footprint. We have established new sales subsidiaries. I think last time we already mentioned our decision to go into the Middle East. We have set up relatively new operations now in Korea, which clearly has the bulk of its investment in the front end. Retail-related expenses, but they also required a buildup of back-of-house facilities, finance, HR, and other parts of that. Expansion weighted on that second element, which we also explained in part of our guidance. We continue to have a CapEx impact also on the fixed cost structure, given the size of our research and development activities based in Switzerland.
Last element is related to the buildup of resources in terms of people, but also systems as we prepare for taking our omni-channel activities in-house. Until we, and it's a trend we expect to continue also in the second half of the year, we will only discontinue our service payment to our current partner as we take this business in-house in the first half year of 2016. Until then, we will have an increasing situation of double running costs, building up the omni-channel capabilities in-house on the logistics side, but also in other supporting activities, which will only become neutral as we discontinue the service payment to our former partner. Does that answer? Sorry, what was the third one?
The last one was on the number of openings.
Exactly. On the expense, as we have done in the previous year, as we have no full visibility on the exact timing on openings of projects, whether we are under discussion at the beginning of the year, given that we're now at the beginning of August, we have secured some of these projects which were still under negotiation, where we're in a pitch situation versus our competitors. The distribution of the additional 15 versus the 15 that we guided previously, it's not much change. The biggest part of the expansion continues to be in Europe. One example, and I think that we are quite proud of, is the relocation of our store in London on Regent Street, which will already be opening this year.
This will be counted as one closure and one opening, but the new store that will open in the fourth quarter will almost be double in size to our current location. That was, for example, one store that we did not include in our initial guidance.
Great. Perfect. Thank you very much.
Thanks, Chiara.
Thank you. Your next question comes from the line of Thomas Chauvet, Citi London. Please ask your question.
Good afternoon, Mark. Two questions, please. The first one on wholesale, the other on the U.S. On wholesale, remember a few years ago, you were indicating that the overall wholesale EBIT margin was generally higher than retail. Given the major change you've done to the wholesale distribution strategy, what would you expect directionally to be the impact on your wholesale margin from substituting BOSS to HUGO and Boss Green from ending the category business, et cetera? What is driving the Q2 EBITDA margin improvement, I think 250 basis points, more or less, given the markdown activity you've mentioned earlier? Was there some non-recurring costs or some other one-offs to explain that swing? Thank you.
Let me start with the U.S. margin improvement. Unfortunately, the impact on inventory write-downs and rebates was most profound felt for us in the U.S. market. To a lesser extent, we are not through yet in the U.S. market in particular. There might be still some smaller implication also in the second half of the year, but not to the same size. Why is this more than overcompensated when it comes to segmental profitability? It's due to the exchange rate effect that we discussed. In Euro terms, we have clearly benefited from the Euro weakness over the last six months compared to the previous year, which more than overcompensated by this as this negative factor.
Underlying, and we try to be very clear on that one, weak like- for- like development, which is below group average, a continuous highly promotional environment, which we can't fully stay immune to, has, in local currency, led to decline in profitability in the U.S. market, which was just for all the technical purpose, consequences from the weakening of the Euro versus the U.S. dollar has been overcompensated. On your question on wholesale margin, we always tried, and I will also do as a part of this call to get into a discussion wholesale with a retail margin on whatever level we would like to discuss that. We manage these as two independent business models, and this is also how we are now working very closely with our wholesale partners to upgrade the BOSS execution.
Based on the initial feedback from our core European markets, I mentioned Switzerland, Germany, and Austria, we're very confident that we will see a quick pickup as we move to a broader territory that wholesale partners will see that a strong focus on BOSS in a branded area will be beneficial not only for us but also for them, as these areas will allow them higher sales densities, higher baskets, and of course, a stronger brand equity, a stronger message to the end consumer. This, clearly with some additional works needed, will also come to the U.S., where after a rough and rocky start, we now start to see progress with our shop-in-shop presence at Saks. Over the next quarters, I do expect that we will further drive our discussion with other wholesale partners to follow the Saks example.
We have given you today an example from Mexico, where we have added another 14 spaces where we took the ultimate step to take this business now as a concession area under own control. In terms of profitability on the category floors, replacing a BOSS suit with a HUGO suit or replacing a BOSS jeans or sportswear product with a Green product. As you know, our gross margin on these products, whether they carry the Green label or the BOSS label, it's not really relevant. If we're able to maintain sales densities, I do not expect a significant shift from the strategy in our pure wholesale profitability.
Thank you.
Thanks, Thomas.
Thank you. Your next question comes from the line of Jürgen Kolb, Kepler Cheuvreux. Please ask your question.
Thank you very much. Coming back to the wholesale question or wholesale point again, I think in the quarter release, you talked about plans to work closer again with the department store operators and what you just mentioned, Mark, indicates or at least gives us the implication as if you're becoming more optimistic now for the wholesale business going forward, 2016, 2017, maybe that this is not going to rather be a stable business, but rather growing business. Would that be, first of all, the right observation from your comments?
Well, on wholesale, we always give projection on what we do see in terms of order intake. Clearly our full year outlook includes now not only order intake for the pre-spring, but also the spring 2016 delivery. As we haven't changed our top line expectation for the full year and also continue to give you a slightly negative wholesale development of full year, basically in line with the first six months, you can see that we have not been positively surprised in terms of wholesale trends. In particular in the U.S. market, and you have seen trading statements, some of our major European partners, it's a cutthroat competition, which is predominantly done on pricing, on promotion. As you know, that's a field in, to protect our brand equity and our retail performance, we are less and less willing to participate.
We continue to have a very cautious outlook on wholesale in particular. Where needed and where we are capable, we take over control into our own hands. These takeovers are never easy, as we now learned with an unfortunate timing in Korea, where the outbreak of the MERS disease clearly has slowed down some of our initial plans. Walk before you run. We will continue to pursue opportunities of takeovers wherever they arise. I continue to take, also on a midterm perspective, a rather cautious outlook on overall sales momentum for Hugo Boss in menswear in our core business and this business. We do expect over proportion growth in womenswear. We expect to grow at least with the underlying category where we have continued operations.
If these business are flat or, for example, like in Switzerland, are negative, we will not be growing at mid or high single-digit rates. We just need to be realistic on the momentum that we can generate on the wholesale side of our business.
Okay. Very much understood. Second one on your online business, which obviously saw a nice boost in the second quarter. Maybe additional comments as to what really drove that increase, maybe also in terms of conversion and what you've seen on top of what you already mentioned?
I think to sum it up, there were two things. One is, once you're on the site, it's the quality of execution. We have clearly learned our lessons to be far more proficient and smart on driving basket size. One of the key drivers to have bigger values per transaction was our ability to sell consumers total looks. People are not coming to our website to buy just a pair of socks or a white shirt. Increasingly, we are successful to sell them a complete outfit. Here I come to the initial element. Of course, there are multiple online pages competing for consumer awareness.
Here with our marketing activities, with better targeting of consumers, we have been able to drive visitor numbers to our stores, but it's not only people who are browsing around, but high-quality visitors that we will have a better chance to convert them into shoppers. Basically, if you go through the value chain, it's the higher number of visitors, better conversion rate, better baskets. One feature that we explained to you, I think, a couple of months ago, which is now nicely being picked up by consumers, is the feature of in-store availability. It's not available, as we know, in all markets, but in these markets where we have this potential now that consumers will discover a product they are interested in, and even if they are reluctant to buy it now, they now have the possibility to reserve this product in our Frankfurt, Berlin, or London store.
Clearly you can see this as just one example how the brand is now increasingly combining these two assets of strength that we have, which is unique and superior to online pure plays.
Okay, understood. Last one, housekeeping one, depreciation in the second quarter up, I think 22% or so. Was that due to the takeover of Korea and China or anything specific there?
No. To my knowledge, we didn't have any depreciation charges. That is just the consequence on the expansion on investments in the prior year, in particular in the retail field. There were no special write-offs or anything related to the takeover of these businesses.
Very good. Okay. Thanks very much.
Thanks, Jürgen.
Thank you. Your next question comes from the line of Claire Huff, RBC London. Please ask your question.
Should be RBC London. Hi, everyone. Three questions, please, as well. The first one, I think you mentioned in your opening remarks that the price had had a bigger impact on the like-for-like in the quarter. Just wondering if you could quantify the split between volume and value from the like-for-like figure, please. Second question. I think you'd said previously that you don't gain operating leverage on the OpEx base while like- for- likes are below mid-single digit. Just wondering, given the new like-for-like guidance for the year, whether you could give some color on OpEx and margin expectations for the second half. Appreciate the gross margin will drag on margins this year, but can we expect any incremental leverage over that cost base in the second half? Third and final question on womenswear.
Just wondering if you could give any extra color on the performance by region. Just wondering whether the positive reception that you're seeing to Jason Wu has been seen across all regions, really. That would be great. Thank you.
Yeah, let me start with the price and volume one. Since we're not selling the same Coca-Cola bottle year after year, it's sometimes difficult to say, okay, if you compare spring/summer 2015 performance to 2014, to what extent is the basket that the woman or the man is buying this year driven because he has bought a slightly more expensive suit or did he buy more suits or did he buy a shirt and a tie with that? In general, we have seen that the average selling prices has increased. Even so, we have not increased overall retail prices in core market. In a way, I would call it a volume effect because we have been able to increase units per transaction, and we have been able to trade people up to higher price points.
This is both demand and supply driven, where as like in previous seasons, in particular in Europe, we have increased the average selling price to our offering, which has been well received by the end consumer. Maybe to comment in this context on the womenswear part, you have seen that womenswear business at Hugo Boss is still far more focused on the European business. The womenswear business, even though it was growing overall in line with the menswear business and both womenswear growing double digits. The most important markets are EUR or pound-based. We have seen a slightly lower translation impact due to the fact that it lacks exposed or it's coming from a lower base in Asia and Americas.
However, in particular, Jason's collection that's predominantly sold via branded spaces in our bigger stores at the department stores, has seen a very strong reception across all three markets. We have seen stronger than group average growth of womenswear in all three regions that we operate. However, the impact coming from the biggest base in Europe is the most important one. On the OpEx leverage, I think there was an earlier question on OpEx expectation for the remainder of the year. As I said, from takeovers, there will be now a higher base of operating costs from these expanded networks, which are dilutive at least in the first 12 months of operation. There will be until the first half year of 2016, increasingly double cost of building up own online fulfillment capacity, where we still are paying to Bertelsmann a service fee for the outsource part of that.
Also on the marketing spendings beyond the pure SG&A expenses, we do expect an overproportionate increase. There will be this year lower than historical OpEx leverage to our numbers. We do not see the necessity to revise our statement that, in general, the company needs a mid-single-digit like-for-like improvement to become margin accretive. However, in the current fiscal year, this general rule is not true due to the fact that we are in a phase of stronger investment also in our infrastructure. Plus the fact that the like-for-like growth is pretty much driven by our factory outlet, so off-price channel compared to our full-price stores. Unfortunately, our full-price stores are not on the strong 5% like-for-like development that we described for the total group.
Okay, great. Thank you.
Thanks, Claire. Thank you for your participation in today's call. We will be happy to speak to you again later after our third quarter results. Let me remind you again on our Investor Day, which we will this time host in our company headquarter in Germany on November 24th. We wish you all a nice summer break and we're looking forward to see you soon. Bye-bye.
That does conclude our conference for today. Thank you for participating. You may all disconnect.