BERLIN — A change in the collection cycle pushed net income down 14 percent in the third quarter at Hugo Boss, while higher marketing expenses and costs related to the group’s retail expansion negatively impacted earnings before interest, taxes, depreciation and special items.
Sales for the Metzingen-based group rose 5 percent in the period.
Net income reached 103.4 million euros, or $129.4 million, in the period ending Sept. 30. Earnings before interest, taxes, depreciation and amortization before special items decreased 7 percent to 165 million euros, or $206.5 million. Dollar ﬁgures are converted from the euro at average exchange rates for the periods to which they refer.
Chief executive officer Claus-Dietrich Lahrs said, “The change in our collection cycle has led to a sales shift in our wholesale business from the third into the fourth quarter. This had an adverse impact on our traditionally strong earnings in the third quarter. We shall, however, return to double-digit growth in sales and earnings in the fourth quarter with our winter business.”
Sales for the group reached 646.3 million euros, or $808.8 million, compared to 615 million euros, or $870.8 million, a year earlier. On a currency-adjusted basis, group sales were ﬂat for the quarter. Sales in Europe were down 4 percent (on a currency-adjusted basis), due to the development of the wholesale business, which in total fell 9 percent in local currencies due to the changed delivery cycle.
Previously, the fall-winter collection was delivered in the third quarter, which, as a result, was always a very strong quarter, with business weakening in the fourth. The new delivery schedule aims to spread shipments more evenly over the year, and has split spring-summer and fall-winter into separate deliveries.
Part of the fall collection was already delivered in the second quarter of 2012, with the main fall deliveries made in the third quarter. The winter collection will now be delivered in the fourth quarter versus the third. “The winter collection is very important for us, and so we know we are on track [for the full year],” a spokeswoman said.
Sales in the Americas grew 13 percent (after adjustment for currency effects), with the U.S. the main growth driver. Asian sales were stable in local currencies, with sales in China gaining 5 percent while the Australian and Japanese markets weakened.
Boss reconfirmed its outlook for 2012, despite a more difficult economic environment. The group is projecting currency-adjusted sales growth of up to 10 percent in 2012, with all regions contributing to the results. Boss expects the wholesale business to remain “roughly stable” but forecast a double-digit increase in the group’s own retail business for the full year. Operative earn- ings (EBITDA before special items) are forecast to increase between 10 and 12 percent.
Analysts from Citibank described third-quarter sales as “a bit disappointing” and the lowest growth observed so far. The Citi Research report further noted that the sales performance “is consistent with the slowdown witnessed in the broader premium and luxury apparel sector (Burberry, LVMH, Puma, Chinese Golden Week).”
In the report’s view, the earnings shortfall in the third quarter is “unlikely to be fully recouped in the fourth quarter, potentially leading to small consensus earnings downgrades.”
Citi, The Commerzbank and Bankhaus Lampe have retained or upgraded Boss shares to “buy.” Citi sees long-term opportunities in retail expansion in Asia and the U.S., product diversiﬁcation and sales productivity improvement. It further noted the shares have outperformed the luxury sector year-to-date, rising 35 percent versus the sector’s 17 percent.
Toward the end of trading in Frankfurt Tuesday, Hugo Boss shares were up 3.38 percent to 76.73 euros, or $99.58 at current exchange.
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