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Hugo Boss Growth Driven by Own Stores

Sales grew by 2 percent as the group's own retail business offset a decline for wholesale in the third quarter.

BERLIN — Strong performance of the group’s own retail business continued to propel sales and earnings growth at Hugo Boss in the third quarter.

Net income for the quarter ended Sept. 30 rose 9 percent to 112.5 million euros, or $149 million at average exchange rates for the period. Earnings before interest and taxes increased 5 percent to 150.5 million euros, or $199.4 million. Chief financial officer Mark Langer said improvements in gross profit margin, which gained 340 basis points in the quarter, were the main driver of the earnings gain.

Group sales grew by 2 percent to 657.9 million euros, or $871.5 million, negatively influenced by currency effects and a 10 percent decline in the group’s wholesale business.

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Sales from the group’s own retail activities (including outlets and online business) rose 18 percent to 320.5 million euros, or $424.6 million, and by 23 percent in local currencies. Comp-store growth after adjustment for currency effects was up 4 percent. In the first nine months of 2013, the company’s own retail sales contributed 51 percent of group sales, up from 45 percent for the period a year previously, and is expected to generate 60 percent of group sales in the fourth quarter. Boss currently operates 992 own retail stores, compared to 840 in 2012.

“Demand in our own stores picked up noticeably in the third quarter compared to the first half-year,” said Hugo Boss chief executive officer Claus-Dietrich Lahrs. “We are therefore anticipating strong growth in sales and earnings in the fourth quarter.”

The Metzingen, Germany-based group more clearly defined its full-year forecast Thursday, which had previously called for “high-single-digit” increases in sales and operating profit growth for the year. The group now said it expects full-year currency-adjusted sales growth of between 6 and 8 percent, supported by all regions, with operating profit (earnings before interest, taxes, depreciation and amortization before special items) projected to grow by 6 to 8 percent as well.

The group continues to anticipate double-digit growth in its own retail business, with sales in the wholesale channel declining at a midsingle-digit rate due to the difficult market environment and shop-in-shop takeovers from its wholesale partners. Excluding takeovers, which involved about 110 shops-in-shop, the group’s directly operated store network will be expanded by about 50 doors in 2013.

Acknowledging that 2013 had turned out to be more difficult than originally expected, Langer told analysts Boss is nonetheless holding to its midterm growth plan, which anticipates 3 billion euros in sales and 750 billion euros in operating profit in 2015, based on organic growth of its existing brand portfolio.