METZINGEN, Germany — Smarting from a nearly 50 percent drop in first-half profits emanating from its U.S. operations, Hugo Boss AG pulled back its full-year earnings forecast for the second time in as many months.
Citing sluggish consumer spending, unfavorable currency and internal and external troubles in the U.S., Hugo Boss AG reported net income for the first six months of 2002 was $30 million, compared to $59.8 million for the same period in 2001.
With first-half profits dropping below expectations, Boss’s management board lowered its 2002 net income forecast to $71 million from $96.4 million. On May 27, the board reduced its net profit expectations to $96.4 million from $108.6 million. The two downward revisions leave Boss with profit expectations that are more than a third — 34.6 percent — lower than they were earlier this year.
Dollar figures are calculated from the euro at current exchange.
The firm attributed the fall to “a negative, non-recurring result in the U.S. and an absence of positive currency influences.” Retail business in the U.S. was not only disappointing in the first half, it noted, but Boss’ revised profit expectations for the year as a whole “reflect the ongoing difficulties in the U.S. fashion market.”
As reported, the first reduction in profit expectations came as the company disclosed an $11 million shortfall, half of it pertaining to “insufficient reserves” and “inventory that was overvalued” in the U.S. The other half was attributed to the combination of the underperformance of its U.S. and Boss Woman units. The 12 million euro amount translated to $11 million at the time of the first revision, but, with the euro and dollar now near parity, is closer to $12 million.
The announcements by Boss in May followed the placement of Marty Staff, chief executive of Hugo Boss USA, and Vincent Ottomanelli, chief financial officer, on administrative leave. More recently, Tony Lucia was named to succeed Staff as ceo. Bruno Salzer became chairman and ceo of Hugo Boss AG, itself a division of Marzotto SpA, on May 29.
The German apparel giant said “no new positive impulses are being anticipated for the fashion segment during the year’s second half.” However, in the official statement released Sunday, Boss said 2002 “sales will remain steady at the previous year’s level.” Last year, revenues reached $1.11 billion, representing the sixth double-digit sales gain for Boss in a row.