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Economy Hits Hugo Boss Results

Both net earnings and earnings before interest and taxes declined 14 percent.

BERLIN — Challenging economic conditions and a shift in the timing of wholesale deliveries negatively impacted profits and sales at Hugo Boss in the first quarter.

Both net earnings and earnings before interest and taxes declined 14 percent, to 82 million euros, or $108.3 million, and to 111.4 million euros, or $147.1 million, respectively.

Group sales slipped 2 percent, reaching 593.5 million euros, or $783.9 million.

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

The company nonetheless reaffirmed its growth forecast for the full year. Currency-adjusted sales and earnings before interest, taxes, depreciation and amortization before special items are expected to rise at high-single-digit rates.

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Boss is also projecting continued double-digit growth in its own retail business and stable development in the wholesale channel in the coming year.

“With a better performance of the wholesale business in the further course of this year, we shall return to renewed growth in the second quarter already,” said chief executive officer Claus-Dietrich Lahrs.

In the first quarter, wholesale sales dropped 14 percent to 301.9 million euros, or $398.8 million. Citigroup analyst Thomas Chauvet noted the deceleration was largely anticipated and “exacerbated by various disruptive effects: impact from the shift to a four-collection cycle (summer collection delivered in the second quarter); advanced deliveries of spring collection in quarter four of 2012, and slight negative impact from ongoing conversion of shops-in-shop from wholesale to retail — in particular El Corte Inglés in Spain this quarter.”

The group’s own retail network — including outlets and online business — reported a 15 percent sales increase in local currencies to 278.7 million euros, or $368.1 million, in the first quarter.

Comp-store sales rose 2 percent on a currency-adjusted basis. The Boss retail network expanded by 36 doors to 876 in the period, and Boss plans to open a total of 50 new stores in 2013.

Strong performance in the U.S. boosted sales in the Americas by 6 percent in local currencies, and slight growth in China contributed to a 1 percent increase in sales in Asia.

In Europe, where wholesale remains the most important distribution channel, sales for the quarter were down 5 percent.