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Hugo Boss Net Drops 15%

BERLIN — The pace of profit deterioration at Hugo Boss AG slowed in the third quarter.<br><br>Net income in the three months ended Sept. 30 fell 15 percent to $52.1 million, as operating profits fell 8 percent to $84.2 million. Sales at the...

BERLIN — The pace of profit deterioration at Hugo Boss AG slowed in the third quarter.

Net income in the three months ended Sept. 30 fell 15 percent to $52.1 million, as operating profits fell 8 percent to $84.2 million. Sales at the Metzingen, Germany-based firm slipped 3 percent to $375.4 million. Dollar figures have been converted from the euro at current exchange rates.

The bottom-line performance represents an improvement over year-to-date trends as net income for the nine months slumped 32 percent to $82.2 million and operating profits were off 25 percent to $132.9 million. Sales essentially ran in place, rising to $908.4 million from $908 million in the 2001 period. Excluding currency fluctuation, sales were up 1 percent, described by Boss chief executive officer Bruno Sälzer as a “good performance” in a world market for better men’s apparel that’s been down 5 to 6 percent.

Much of the weakness in the year-to-date results can be traced to “nonrecurring and special effects for which adjustments were already made in the first half of 2002,” the firm said. These items relate primarily to inventory discrepancies of $10.8 million in the U.S., which occurred in 2001, but were posted in 2002. With the exception of a pending class-action suit on behalf of shareholders, the issues surrounding the inventory discrepancies and the departures of former Boss USA ceo Marty Staff and chief financial officer Vincent Ottomanelli are behind the firm, Sälzer stated.

“It was all dealt with in July and there are no aftereffects,” he told WWD.

Merrill Lynch said that Hugo Boss’ nine-month results “came in in line with our consensus, and above our estimates at EBIT [earnings before interest and taxes] level.”

While revisions in the Boss Woman’s collection won’t be reflected in sales figures until the first quarter of 2003, the firm expects double-digit sales gains in women’s wear at that time and a break-even performance in the second half of next year. Sälzer added that women’s should be profitable by 2004. Hugo, Boss’ younger fashion label for both genders, crossed the nine-month finish line with a 17 percent sales gain, to $82.1 million.

For the third quarter, sales were down 12 percent in Germany, but up 5 percent in France, 6 percent in Italy, 15 percent in Spain and 5 percent in Asia.

In the U.S., sales fell 5 percent, to $45 million, but rose 3 percent in constant currencies. Even though U.S. business has slowed, Sälzer said he hopes that yearend results will be on par with those of last year. “I think we’ve reached the bottom of the trend in the States,” he said, “and we expect the future to be slightly better.”

Boss sees a stable fourth quarter and expects to meet its yearend projection, which was revised in July. This calls for flat sales of $1.09 billion, and net profits of $69.8 million compared to $106.7 million in 2001.