Hugo Boss Net Profit Up 30% in Q2

After a difficult start to 2013, the German fashion group was back on track in the second quarter, posting double-digit increases in sales and earnings.

The Hugo Boss runway show in Shanghai.
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Men'sWeek issue 08/01/2013

BERLIN — After a difficult start to 2013, Hugo Boss was back on track in the second quarter, posting double-digit increases in sales and earnings.

This story first appeared in the August 1, 2013 issue of WWD.  Subscribe Today.

Net income attributable to equity holders for the quarter ended June 30 surged 30 percent to 52.2 million euros, or $68.2 million, with earnings before interest and taxes increasing 27 percent to 75.5 million euros, or $98.6 million. Sales gained 10 percent (11 percent on a currency-neutral basis) to reach 531.7 million euros, or $694.3 million.

Dollar figures are converted from euros at average exchange rates for the periods in question.

Boss said all regions and distribution channels contributed to the positive sales development in the second quarter. Sales in Europe were up 13 percent. Growth in the U.S. drove sales in the Americas up 7 percent, while improved performance in China, particularly Hong Kong, boosted Asian sales 3 percent. On a currency-neutral basis, sales for the regions were up 14 percent, 9 percent and 7 percent, respectively.

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The group’s wholesale business also picked up 5 percent in the quarter, reflecting positive effects of the new collection cycle. The Metzingen, Germany-based group’s own retail business (including outlets and online) moved ahead 13 percent, with comp-store sales growth at 2 percent.

Although Boss said the improved second-quarter performance compensated for negatively impacted first-quarter results, the weak first quarter was nonetheless reflected in its first-half figures. Net income attributable to equity holders was flat for the first six months at 133.8 million euros, or $175.7 million. EBIT was down 1 percent to 186.9 million euros, or $245.5 million, and group sales inched up 3 percent to reach 1.13 billion euros, or $1.48 billion.

In the six-month period, wholesale sales slipped 7 percent. Boss noted the group’s wholesale business was dominated by changes in delivery cycles, a difficult market environment and takeovers of shops-in-shop from wholesale partners. Boss took over 42 shops-in-shop, which, among other things, allowed the concession model to be expanded in Spain, the U.K. and the U.S., Boss said. The group’s own retail business was up 14 percent for the period, and now represents more than 52 percent of group sales, up from 47 percent in the period a year previously. Thirty-three new stores opened in the first six months of the year, countered by 14 closures. The group currently operates 901 own retail stores.

By brand, Hugo posted the strongest growth in the six-month period, with sales up 11 percent. Boss sales rose 3 percent and Boss Green 4 percent, while Boss Orange registered a decline of 4 percent.

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For the year ahead, Boss reconfirmed its sales and earnings targets for 2013. The group is expecting high-single-digit sales growth on a currency-neutral basis for 2013, supported by all regions. Its wholesale business is expected to decline at a mid-single-digit percentage rate due to a difficult market environment and a higher-than-expected number of takeovers. Boss is expecting to take over almost 100 units this year, including 37 Saks shops-in-shop.

The group’s retail business is again expected to deliver double-digit growth and remain the main sales driver. Fifty new directly operated stores are slated to open this year, with a strong focus on Europe. High-single-digit growth is forecast for operating profit (EBITDA before special items), driven by the expansion and improved management of its own retail business. Net income is also expected to rise, Boss said in its six-month report.

Despite recessionary conditions in core European markets, Boss is maintaining ambitious growth plans for the midterm. The group aims to reach 3 billion euros in sales, up from 2.35 billion euros in 2012, and 750 billion euros in operating profit in 2015, based on organic growth of its existing brand portfolio.