By  on July 30, 2009

BERLIN — In a difficult market environment, Hugo Boss AG saw losses significantly widen and sales slip in the second quarter.

The German fashion house posted a net loss of 15.9 million euros, or $21.2 million, compared with a loss of 6.1 million euros, or $9.5 million, for the same period a year earlier. Second-quarter sales declined 5.4 percent to 303.9 million euros, or $413.9 million. Dollar figures are converted from the euro at average exchange for the respective periods.

Boss spokesman Philipp Wolff noted the second and fourth quarters are always weak for the company. He said earnings for the quarter were negatively affected by the closure of unprofitable stores and some showrooms, a sharp decline in Eastern European sales and resulting partial defaults in payment, restructuring costs and the overall worsening of the economic climate.

However, the group said measures taken to optimize cost structures and improve work processes helped soften the impact of the global economic crisis on its performance in the first six months of 2009. Net income declined 19 percent to 47.7 million euros, or $63.7 million. Sales for the first half were down 5 percent to 787.6 million, or $1.06 billion.

“The results for the first half of the year show that Hugo Boss can react quickly and flexibly to changes in the market,” chairman and chief executive Claus-Dietrich Lahrs said. “Thus the group can and will hold its ground internationally in the current turbulent environment.”

Geographically, Boss recorded a 10 percent drop in earnings to 58 million euros, or $77.4 million, and an 8 percent drop in European sales to 540 million euros, or $721 million, in the first half. Eastern Europe was hardest hit, with currency adjusted sales down 35 percent. In the Americas, earnings slumped from 7.8 million euros, or $11.9 million, to 1.2 million euros, or $1.6 million. Boss noted the margin declined due to modified selling conditions in both wholesale and retail channels. Sales in the Americas, however, on a euro basis rose 4 percent to 148 million euros, or $197.6 million.

Earnings in the Asia-Pacific region dropped from 9 million euros, or $13.8 million, to 4 million euros, or $5.3 million, on flat sales. Royalties were also at last year’s level of 21 million euros, or $28 million, for the six-month period.

For the year ahead, Boss is expecting a continued sales downturn, but is anticipating a return to profitable growth in 2010 when it expects the economy to improve.

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