UPDATE 2-Hugo Boss rides high on Chinese luxury demand

* Sees 2011 sales up at least 12 pct, core profit up 15 pct

* CEO says smaller Chinese cities contributing to growth

* Sees U.S. demand for premium and luxury rebounding

* Shares rise 3.7 percent, top mid-cap gainer

(Adds shares, CEO interview)

By Victoria Bryan

METZINGEN, Germany, March 29 (Reuters) – German fashion
house Hugo Boss (BOSG_p.DE: Quote, Profile, Research) forecast that China’s love affair
with luxury would drive double-digit sales and earnings growth
this year.

“We’ve had a good start to 2011 and are confident of a
another record year,” Chief Executive Claus-Dietrich Lahrs told
reporters on Tuesday.

Shares rose 2.8 percent to 56.72 euros, the biggest mid-cap
gainer in Germany (.MDAXI: Quote, Profile, Research), with analysts saying the prediction
for sales growth of at least 12 percent and core earnings growth
of 15 percent were above expectations.

Hugo Boss, which has been expanding its casual wear range
alongside its popular suits, said European brands in particular
were expected to benefit most from rising wealth in China.

LVMH, the world’s largest luxury goods company, last month
said Chinese clients were “infatuated” with its Louis Vuitton
brand. [ID:nLDE71310T]

Lahrs told Reuters in an interview that smaller Chinese
cities were also now experiencing strong growth, as city
planners develop infrastructure and shopping malls to encourage
people to stay in second-tier cities instead of heading for the
major centres such as Shanghai and Beijing.

Hugo Boss, majority-owned by private equity firm Permira
[PERM.UL], also said growth in 2011 would be helped by a
strategy to open more of its own stores. It ended 2010 with 537
stores, compared with 438 a year earlier.

Last month, it took over 15 franchise stores in the UK from
retailer Moss Bros (MOSB.L: Quote, Profile, Research). [ID:nLDE716099]

Lahrs said that of the 70 new store openings planned for
2011, 20 were for China, six in the United States and the rest
for Europe.

“This confirms that Europe is still an attractive market,”
he said at the company’s headquarters in the southern German
town of Metzingen, near Stuttgart.

Other clothing groups including Gerry Weber (GWIG.DE: Quote, Profile, Research),
Adidas (ADSGn.DE: Quote, Profile, Research) and Burberry (BRBY.L: Quote, Profile, Research) have also been expanding
their network of own stores to take advantage of the higher
margins they bring.

Lahrs said Latin America markets also showed promise, while
U.S. growth was expected to be better than in Europe.

“We see no interruption in U.S demand. Premium and luxury is
seeing a rebound,” Lahrs told Reuters. [ID:nLDE72S103]

Hugo Boss had already published preliminary results in
February, showing sales of 1.7 billion euros. [ID:nLDE7120C6]
(Editing by David Cowell)
($1=.7084 Euro)

UPDATE 2-Hugo Boss rides high on Chinese luxury demand