BERLIN — Hugo Boss registered modest gains in the first quarter, and said it will continue to work on improving its product quality throughout this year.
In a conference call Wednesday, Boss chief executive officer Mark Langer described the quarter as “lively. We’ve had a distinctly positive reaction to our current collection for spring/summer,” and added that the group was better oriented to the needs of the Boss customers. “And this has paid out in our own retail business and online as well.”
However, he said Boss still has a lot to do in the year ahead, and is investing “significantly” in product quality in terms of fabric and finishing.
Langer said 2018 is a good year for consumers to buy Boss and Hugo, citing quality.
“Our technicians say our quality for the price and feel for detail is on a very high level. We’re working with new innovative materials and just brought out our first sustainable sneaker, the upper of which is made from a fabric derived from pineapples,” he said.
Summing up his projections for the future, the executive added that 2018 will be a “growth year” involving big investments in product and brand presence. This may put pressure on earnings performance, he acknowledged, but is meant to set out a strong basis for future growth. The group’s retail network is not slated to expand, but Boss is undertaking about 150 store renovations and is also working on a new store concept for its Hugo brand.
Boss’ first-quarter results were boosted by cuts in operating expenses, although currency effects had a dampening effect on earnings growth.
The Metzingen-based group reported a 3 percent gain in net income for the quarter, which reached 50 million euros, and an 8 percent jump in earnings before interest and taxes, which hit 70 million euros. Earnings before interest, taxes, depreciation and amortization before special items was up 1 percent to 99 million euros.
Group sales were flat at 650 million euros, but in currency adjusted terms, gained 5 percent for the quarter. Boss said all three regions posted currency-adjusted gains, with the group’s own retail business, which generated 378 million euros, again driving growth.
Comparable-store sales were up 7 percent, with Europe and Asia-Pacific moving ahead at a mid- and high-single-digit percentage rate, while in the Americas, sales grew at a double-digit percentage rate. There are 436 freestanding Boss stores in the group’s almost 1,100 doors worldwide.
The company’s online business leaped 43 percent, and Boss reported a slight gain in its wholesale business on a currency-adjusted basis.
“We made a good start to 2018,” stated Langer. “Our growth is broad-based. The strong increase in the group’s own retail business shows that our new collections are being well received by customers. Our investments in the quality of our products and the desirability of our brands are therefore paying off.”
He also reconfirmed the financial outlook for the full year, which calls for sales and consolidated net income growth at a low to mid single-digit percentage rate, and EBITDA before special items developing within a range of minus-2 percent to plus-2 percent.
Group performance in terms of brand and gender was more complicated, reflecting changes in its distribution strategy. The business now focuses exclusively on the Boss and Hugo brands, with Boss, for example, taking over selling space from Hugo in certain product categories in the wholesale channel.
Moreover, the presence of Hugo in the outlet channel is being reduced. The company pointed out that both measures are intended to sharpen Hugo’s brand message.
First-quarter sales for the Boss brand reached 562 million euros, a nominal gain of 1 percent, while Hugo’s sales were down 9 percent to 88 million euros. The group noted Boss benefited in particular from growth in casualwear, whereas at Hugo, a double-digit gain in casual wear sales could not compensate for declines in business wear.
Overall, men’s wear sales were up 1 percent to 581 million euros, while the group’s women’s wear business continues to flounder, down 7 percent to 69 million euros in the period. The group said the performance was primarily attributable to the Boss brand and related to the reduction in retail space.