Ladies and gentlemen, as you know, the past year was an eventful one. With that in mind, I warmly welcome you to this year's annual shareholders meeting on behalf of my fellow members of the managing board and the employees of Hugo Boss. I would also like to extend an equally warm welcome to those of you watching on the web. When we met here a year ago, I called 2017 a year of stabilization. Our goal was to stabilize sales and profits and implement important strategic decisions. We wanted to lay the foundations to return to sustainable and profitable growth. Today, I can tell you that we succeeded. We met our financial targets and even exceeded some of them. We also made good progress in the core areas of our strategy.
We achieved these successes in a market environment that has improved somewhat overall compared to 2016, remains very challenging in some regions. The upper premium apparel segment grew globally by around 4% in 2017. The industry development was, however, marked by substantial regional differences. Important European markets such as Great Britain, Spain, and France benefited from good business with tourists. Germany, on the other hand, experienced weak local demand. In North America, the decline in business in large department stores and the continued heavy discounting weighed on the performance of the sector. In Asia, on the other hand, the industry benefited in particular from a recovery in local demand. In China, consumer confidence has increased. This, along with the depreciation of the local currency, which shifted consumer demand towards the domestic market, had a positive impact on industry sales.
The market environment in Hong Kong and Macau also improved over the course of the year. We benefited from this upturn in the market, above all, from the progress made in implementing our strategy. Thus, our growth in our own retail business clearly accelerated in the past year. While like-for-like sales decreased by 3% in the first quarter 2017, we closed the fourth quarter with growth of 7%. This was the strongest growth in a single quarter for five years. Several factors contributed to this performance. We put our online business back on track. We significantly changed the product ranges in our stores. In addition to our business wear offering, we strengthened our focus on sportive leisure wear, we expanded the entry price point offering, thus asserted our positioning in the upper premium segment. These measures have strengthened our position in key markets.
We held up quite well in our challenging domestic market. Year-on-year sales remained stable. Given the general decline in brick-and-mortar retail, this is a remarkable performance. We continued to be very successful in Great Britain, our second largest European market, where, adjusted for currency effects, sales rose by 9%. As a result, it was the eighth year in a row that we saw growth in the high single-digit percentage range. Solid demand from tourists whose willingness to buy has risen as a result of the weak pound plays a role here, very robust local demand is even more important. We were able to achieve a real comeback in the U.S. during the fiscal year. There was a significant increase in demand in our own stores, particularly in the second half of the year.
In a difficult market environment, we achieved a better performance in our full-price business, both in-store and online. This demonstrates that we have successfully optimized processes in our own retail business. It also proves the resurgent strength of our brand. Sales in the U.S. were down 1% year-on-year due to the decline in wholesale. In China, our largest market in Asia, we were able to sustain the improvements we achieved at the end of 2016. The new pricing architecture and the strong digital focus added momentum to our business. Overall sales in this market were up by 8%. Our success in the U.S. and China, two markets in which we previously faced considerable pressure, emphasizes the effectiveness of our course correction, which we initiated in 2016. Painful as it was, withdrawing BOSS from off-price selling in the U.S. wholesale business was the right decision.
Adjusting regional pricing differences, hence bringing Asia close to the global price level, was also the right thing to do. Adjusted for currency effects, consolidated sales increased by 3% overall in the past year. As a result, we outperformed our original expectations at the beginning of the year. With the appreciation of the euro against most other major currencies, sales in our reporting currency increased by 1% to more than EUR 2.7 billion. On the cost side, sales and marketing expenses increased by 2%. We benefit from the fact that we now invest significantly more in renovating existing stores than in new openings, and that we have successfully renegotiated lease agreements. In addition, as announced in the summer of 2016, we closed 16 loss-making stores at the end of the 2017 fiscal year.
At EUR 491 million, our operating profit, EBITDA, before special items, was virtually unchanged over the prior year. Consolidated net income grew by 19%. The significant increase was largely due to the fact that we did not have the expenditure for store closures anymore, that we still had in 2016. The increase in consolidated net income and the very healthy development of free cash flow makes it possible for us to propose a dividend increase of EUR 0.05 to EUR 2.65 per share. This results in a payout ratio of 79%, a return to our dividend policy, which provides for a corridor between 60% and 80% of consolidated net income. We exceeded this corridor last year as income was significantly impacted by the closure of unprofitable stores. These were one-off effects that did not recur in fiscal year 2017.
We will continue to aim for a corridor of 60% to 80% for future dividend payments. We are convinced that dividends must primarily be based on the development of consolidated net income. In addition to the dividend, we naturally also want to increase value for our shareholders through increases in the share price. The Hugo Boss share increased by 22% in 2017. It therefore outperformed the DAX and MDAX benchmarks, which closed the year up 13% and 18%, respectively. Investors seem to reward our progress in business operations and also our improved medium-term growth prospects. Our strategy aims to return the group to long-term profitable growth. We want to be the most desirable fashion and lifestyle brand in the premium segment. This is our vision. We have defined four strategic fields of action so that our vision can be turned into reality.
We are realigning our brand portfolio and the positioning of our BOSS and HUGO brands. Based on this two-brand strategy, we are further developing our distribution strategy. We are driving forward the digital transformation of our business model, and we want to make important business processes faster and more agile. Moreover, we want to promote the entrepreneurial thinking and action of our employees. It is also about a change in corporate culture. We made great progress last year in this strategic realignment process. Let me now show you how things look in each area. The core element of our new brand strategy is the clear focus on two strong brands, BOSS and HUGO. As part of this, we have integrated the BOSS Green and BOSS Orange brand lines into the BOSS core brand, having simplified our brand portfolio.
Both brands, BOSS and HUGO, share core Hugo Boss attributes such as premium quality, perfect fit, innovation, and sustainability. Nonetheless, both brands are characterized by their individual attributes, and each targets a clearly defined customer group. With our BOSS brand, we are targeting status-oriented, rationally-minded customers who wish to dress in a classic, yet modern and high-quality style. The BOSS customer has exacting standards when it comes to quality and attaches great importance to an advantageous value for money proposition. In contrast to BOSS, HUGO targets the customer who is significantly more fashion conscious and considers his style of dress to be an important element in expressing their personality. The HUGO customer is open-minded individual and also likes to buy via online and mobile channels. The first collections based on the new brand strategy have been in stores since the end of 2017.
We are very satisfied with the sales of the collections as the first quarter results published yesterday underline. The feedback we have received on the collections that hit the stores this year is also very positive. We presented the Fall/Winter 2018 collection of BOSS Menswear entitled Sports Tailoring at the New York Fashion Week at the beginning of February. The collection was very well received by the fashion press. In particular, they highlighted the clear statement made by the collection, which skillfully combines the formal core brand with a sporty, casual look. Only a few days later, we presented the BOSS Womenswear collection, also as a part of the New York Fashion Week. The audience was in for a scaled-back presentation that put more emphasis on the collection itself. This event also marked the end of Jason Wu's role as Artistic Director of BOSS Womenswear.
Under his responsibility, BOSS Womenswear has made significant progress over the past years. Thanks to him, especially the catwalk collections, each representing top fashion of the collection, attracted more attention. The creative team will continue its work under the direction of Ingo Wilts. In the future, the focus will be on making the commercial retail collections more fashionable. The statement of these collections will be further geared towards our menswear to carve out the unique DNA of the BOSS brand, also in our Womenswear collections. 2017 was also a milestone for HUGO. HUGO appeals to customers who pursue a very individual lifestyle. HUGO celebrates this lifestyle: cosmopolitan, always curious, and authentic in style. The collection we presented in Florence in June 2017 expressed this message powerfully. A former factory building was the perfect venue to showcase the Spring/Summer 2018 collection.
It features a progressive, unconventional brand look that combines our core competencies with respect to quality, innovation, and fit with the non-conformity that characterizes the HUGO brand. We will build upon this consistent alignment of HUGO this summer. In early July, we will showcase HUGO with a big show during the Berlin Fashion Week. With its creative, vibrant scene, Berlin is the perfect fit for HUGO. The city is therefore the ideal stage on which we will make a statement in our domestic market.
The realignment of our brands has given us the best prerequisites to further improve the performance of our own retail business. In the past year, we increased sales productivity, that is, the sales we generate per square meter of retail space each year, by 2% to EUR 11,100. Our target remains EUR 13,000 per square meter by 2021. How do we intend to achieve this ambitious target?
First, we will be expanding the BOSS casual wear offerings in our stores over the next 12 months, thereby benefiting from the significant enhancement of the previous BOSS Orange offering. We have significantly increased the quality of the materials used and also invested in the finishing. That means that we can now boast a first-class value performance ratio. The spring/summer 2018 collection reflects these changes for the first time and has been available for sale since January. We are convinced that the expansion of our casual wear offering will have a positive impact on customer footfall in our stores. Second, we are introducing a new store concept for BOSS. The stores will be much lighter and more inviting. They will also be more functional. Styles and sizes not on display are instantly available in drawers and hidden shelves.
In addition, the store is connected to the online world via various digital elements. This will enable our sales staff to offer customers products that are not available at the store. In the past year, we tested this concept in three pilot stores. The results were very positive. The new concept will be introduced in all our stores that we will open or renovate this year. We will also use the new store concept for the new construction of our flagship outlet in Metzingen. This outlet will act as the benchmark for the future design of this kind of stores globally. We will take customers on a journey, offering them a unique brand and shopping experience with over 5,000 square meters of sales space. The structure of the building facilitates the rapid supply of goods. Over 100 staff will be employed there in future.
With an investment well into the double-digit million EUR range, the new building is also clear commitment to Metzingen. I'm also pleased that the future address of our outlet will be Hugo Boss Square. The groundbreaking ceremony took place at the beginning of April, and the opening is scheduled for March 2019, for the fall of 2019. Thirdly, we have invested in our service. My colleagues on the managing board and I met with some of our longtime customers for some fireside chats in Hamburg and London. Many of them emphasized that their relationship with individual members of our sales staff plays a key role in choosing our brand. That's why we invest in the intensive training of our sales staff, as well as in the personalization of our customers' entire shopping experience. It starts with communication.
We will strongly align our newsletters to our customers based on their personal preferences. Our website, hugoboss.com, is also being personalized. For example, it adapts the selected product highlights on the start page to visitors' navigation history. Finally, we will be introducing the full range of omni-channel services in all of our European online markets by the middle of this year. These services include click and collect, and they include order from store, and return in store. These services will be introduced with the new store concept, which includes the installation of digital tables and mirrors that can also be used as screens. This gives our sales staff and customers access to the complete online offering of Hugo Boss. All of our stores in the U.S. already offer click and collect. The remaining omni-channel services will be available there latest by the end of 2018.
The purchasing behavior of our customers will continue to change. They will increasingly use digital services to find out about fashion trends, to experience our collection, and to engage in dialogue with our brands. This will not make brick-and-mortar retail superfluous. On the contrary, our stores will continue to be the most important point of contact with our customers. The place where we offer them the chance to experience our collections and receive expert advice, and of course, to try on our products. In other words, online and offline are complementary. The services we've discussed will link these two worlds even more closely. In our online business, we have continued the momentum of the end of last year into the new year. In mid-March, we upgraded the hugoboss.com website to reflect the two-brand focus. Structure and layout of the website clearly differentiate the two brand worlds of BOSS and HUGO.
Customers with a preference for one of the two brands can directly navigate to the homepages of BOSS and HUGO via the links boss.com and hugo.com. We've also ensured that customers without a clear brand preference can browse through the entire product offering and are able to easily switch from one brand world to the other. Of course, we will also enhance the presentation of BOSS and HUGO on our partners' websites. In the future, this could mean that we take control over these websites via concessions businesses. Where this is neither possible nor economical, we will ensure the greatest possible harmonization with our own standards. Digitalization is, of course, not just about distribution. We will digitalize key operational processes along the entire value chain and increase our efficiency. One example, we will present HUGO's first digitally designed collection in the late summer of this year.
It is composed of a variety of casual wear styles and is being developed using virtual prototypes. We will make such collections a regular part of the HUGO offering. Thanks to the significantly shorter development process, we will be able to create new collections at regular intervals. A decisive competitive edge in today's fashion world. Such a collection is distributed primarily via the internet. This holds true even for HUGO's wholesale business. Our wholesale partners in Germany, in France, and the U.K. already have the opportunity to order the HUGO collections digitally. A table-sized touch screen, which digitally presents the entire collection, including all of the color and style options, increasingly replaces the traditional form of selling, where the collection is presented to trading partners in the form of expensively produced samples.
By the end of this year, we will have taken the first steps to implement the digital showroom for the BOSS brand as well. My comments make it clear that the importance of the HUGO brand in our group exceeds its purely commercial significance. HUGO plays a pioneering role within our company in many areas, with digitalization being just one example. HUGO benefits from its relatively small size and thus its greater flexibility and responsiveness. The brand offers us the ability to implement and test innovations quickly. If these innovations prove successful, we can carry them over to the much larger BOSS brand with a higher probability of success. We do not only want to become faster and more flexible, we also want to systematically enhance our sustainability activities in order to further increase confidence in our company and in its brands.
For example, we were included in the Dow Jones Sustainability Index for the first time last September. This is one of the best-known sustainability-related equity indices and includes the world's leading companies in this field. We're one of only five companies in our segment to qualify for inclusion in the index. We attach great importance to dialogue with our stakeholders to obtain input on how to further develop our sustainability strategy. That's why we held a second Bad Urach stakeholder dialogue in 2017 and exchanged views with around 25 external participants. One of our stakeholder's requests was for us to disclose a list of all our finished goods suppliers and their manufacturing facilities. We have complied with this request and have published this information on our website.
Our latest sustainability report is now also available on our website, in which we report on our efforts and the successes achieved and the remaining challenges. Our collaboration and alliances also fosters dialogue with our stakeholders. For example, Hugo Boss has been a member of the Fair Labor Association since February. The accreditation is the fruit of the company's commitment to fair working conditions in recent years. We will, of course, continue to engage in this area, both within the FLA and also in other formats, such as the Partnership for Sustainable Textiles and the Tamil Nadu Initiative, which seeks to improve the standards of textile production in India. Besides this, our customers mainly experience sustainability in our products. This is why we are working on the development of sustainable materials, and we particularly rely on innovation.
Since the beginning of May, for example, we have been offering shoes exclusively made from vegan materials. A novel production method makes it possible to make this material from pineapple leaves as an alternative for leather. The shoe strings are from organic cotton and the soles from plastic. We would like to widen the use of sustainable materials in our collections. First, we'll focus on cotton. This is the most important textile fiber for Hugo Boss. By 2020, half and then even 80% of the cotton will come from sustainable sources. In sponsoring, too, we continue the idea of sustainability. It's been since September we have become the first official clothing partner of the Formula E. The Formula E races take place right in the centers of major cities such as Hong Kong, Rome, and Paris.
This means that they offer exceptional racing experience and a perfect platform for presenting innovative and sustainable propulsion technologies. Ladies and gentlemen, we take sustainability very seriously and are pleased that this is also perceived by the public. In conclusion, let me address our expectations for the current financial year. We expect our sales growth to accelerate as compared to 2017. On a currency-adjusted basis, sales should grow in the low to mid-single-digit % range. All regions and sales channels are expected to contribute to this growth. From a regional perspective, we expect the largest growth in Asia. If we look at distribution channels, the increase in the group's own retail business will exceed those of the wholesale business. We expect mid-single-digit % growth in existing retail space. This includes the online business, for which we anticipate double-digit % growth.
Operating profit before special items is expected to develop within a range of -2% to +2% compared to the prior year. This forecast takes into account negative currency effects of some EUR 10 million. The group's net income should increase in the low to mid-single-digit % range. The consolidated net income will benefit from a normalization of the group's tax rate at 26%. The tax rate in the past year was 30% due to the revaluation of deferred tax assets in the U.S. The first quarter results published yesterday show that we are on track to reach these goals. Currency-adjusted sales were up 5%. However, the appreciation of the euro meant that growth in the group's reporting currency was weaker. On this basis, sales remained stable at EUR 650 million. In the group's own retail business, the positive momentum of the fourth quarter continued.
Adjusted for currency effects, sales in this distribution channel increased by 8%. In the first, on a like-for-like basis, the currency-adjusted sales growth was 7%, unchanged from the fourth quarter. Currency-adjusted sales in the wholesale business rose 1%. All regions contributed towards this growth in sales. In Asia Pacific, sales were up 12% on a currency adjusted basis, primarily supported by continued growth in China. In Americas, currency adjusted sales were up 7% year-over-year. This was mainly due to the U.S. market, where we continued our recovery and were once again able to record double-digit % growth rates in the group's own retail business. In Europe, the overall market environment remains difficult. Nonetheless, the region was up 3% on the currency adjusted basis. The gross margin declined by 40 basis points in the first quarter. Investments in product quality were the main reason for this.
This was also partially offset by the positive effects from the increasing share in sales of the group's own retail business. Operating profit was up 1% and consolidated net income was up 3%. Let me summarize. We've made great strides in the strategic realignment of Hugo Boss. The sales development during the past year has made us even more confident that we are on the right track with the realignment of our two brands, BOSS and HUGO. Our confidence is affirmed by the initial sales data for the new collections and our wholesale partners' feedback regarding our Fall/Winter collection. On behalf of the entire managing board, I would like therefore to use this review of what has been achieved to express our thanks to our employees. They all have every reason to be proud of themselves and their work. We won't be resting on our laurels, of course.
We have identified further drivers of continued growth that will come to fruition this year and beyond. This includes the further development of our collections in line with the brand strategy, as well as the optimization of our retail processes, both online and offline. These measures entail further investment, which in tandem with negative currency effects, will limit earnings growth this year. I would like to stress here that these investments will enable our brands to make further progress. Nonetheless, it is plain that the financing of these investments must come from improvements in efficiency elsewhere. I'm sure that we will achieve both and thus ensure sustained and profitable growth in the 2019 fiscal year and beyond.
Ladies and gentlemen, I would like to thank you for your loyalty and would like to combine my thanks with the hope that you will continue to accompany us on our future journey. We will do our best to justify the trust that you have placed in us.