Hugo Boss Profits Drop in Third Quarter

Net income for Hugo Boss dropped 24.8 percent in the period, and the group's wholesale business remains under pressure.

BERLIN — Against the background of a global recession, Hugo Boss continued to see sales and earnings decline in the third quarter.

This story first appeared in the November 3, 2009 issue of WWD.  Subscribe Today.

Consolidated net income dropped 24.8 percent to reach 51.5 million euros or $73.6 million, which Boss attributed to restructuring charges related to store and showroom closures and a tightening of the group’s wholesale network, particularly in eastern Europe. All dollar figures are converted from the euro at an average exchange rate for the respective period.

Earnings before interest and taxes were down 32 percent to 73.4 million euros, or $104.9 million, while sales in the quarter slipped 15.5 percent to 450.4 million euros, or $643.7 million.

For the full year, Boss said it is expecting a sales decline of about 9 percent, in line with its performance in the first nine months. The operating profit margin (EBITDA before special items, in relation to sales) is expected to be at last year’s level. For 2010, Boss is forecasting “profitable growth.”

The German apparel group said its focus on its own retail operations positively impacted sales in the first nine months, while its wholesale business remained under pressure. Regionally, sales in Europe fell 13 percent in the January-to-September period, primarily due to ongoing weaknesses in eastern Europe and Spain.

In the Americas, declines in North America were offset by 32 percent sales increases (in local currencies) in Central and South America, for a regional gain of 2 percent. In the Asia-Pacific region, sales were down 1.6 percent, and licensing revenues were roughly on par with last year.

Boss said it will continue structural realignments and its concentration on cost and results management in the year ahead. This includes margin-based collection planning using a global purchasing network, reducing the complexity of collections to further cut production and logistics costs, and curtailing existing organizational overlaps in staff structures. “We want to use greater differentiation in our brand portfolio,” chief executive Claus-Dietrich Lahrs added, “to tap into further sales potential and thus strengthen our competitive advantage.”