Hugo RTW Spring 2019

BERLIN Hugo Boss saw group sales pick up in the second quarter, buoyed by strong sales in Europe and China and a return to growth in the wholesale channel, but currency effects and higher operating expenses had a negative impact on earnings performance in the period.

Net sales rose 3 percent to 653 million euros in the quarter, which on a currency adjusted basis represents growth of 6 percent. This was slightly above the consensus of 22 analyst estimates as compiled by Vara Research.

Operative earnings, or earnings before interest and taxes, fell 8 percent to reach 74 million euros, while net earnings were down 7 percent at 54 million euros. These results were also roughly in line with median analyst estimates.

For Hugo Boss, the quarter provided further evidence that the group’s strategic realignment is taking effect. The group confirmed its outlook for the full year, which calls for an increase in currency adjusted group sales at a low to mid-single digit percentage rate and a low to mid-single digit percentage rate increase in consolidated net income. Earnings before interest, taxes, depreciation and amortization before special items is expected to develop within a range of down 2 percent to up 2 percent, with a “largely stable” gross profit margin.

“We are right on track,” said Mark Langer, chief executive officer of Hugo Boss. “The sales growth in the second quarter speaks for itself: we achieved almost double-digit growth in Europe and were also able to continue our recovery in the challenging German market,” he declared. He added the Boss and Hugo collections have been very well received both at home and abroad, “reflected in the positive feedback from our wholesale partners and in the robust momentum of our retail business.”

“The performance of our online store is particularly encouraging,” he also said.

Indeed, with a 47 percent growth spurt, online provided one of the quarter’s strongest performances. Comparable-store sales in the group’s own retail business were up 5 percent, supported by gains in all regions and sales formats, Boss said. The group’s wholesale business gained 10 percent, positively impacted by delivery shifts and a faster-paced replenishment business.

In terms of markets, the U.K. and Benelux countries clocked in 12 and 11 percent sales gains respectively, while France grew sales 5 percent and Germany 2 percent. Group sales in the Americas were flat on a currency-adjusted basis. In the U.S., Boss said sales growth in the group’s own retail business couldn’t fully offset decline in the wholesale business, pushing U.S. sales down 1 percent overall. Canada and Latin America, on the other hand, recorded low and midsingle digit sales increases.

China motored growth in Asia-Pacific, where overall sales rose 2 percent, or 7 percent in currency-adjusted terms. Sales revenues were up 8 percent in China, with comp-store sales growth in mainland China reaching the high single digits. Hong Kong and Macau contributed double-digit growth rates, and sales were also up in Japan.

Ongoing changes in distribution strategy were reflected in the sales performance of the Boss and Hugo brands. The group is transferring space from Hugo to Boss in certain product categories, and in addition, is reducing Hugo’s presence in the outlet channel. Intended to sharpen Hugo’s brand message in the long run, these measures pushed Hugo sales down 6 percent to 85 million euros in the quarter. Boss, on the other hand, grew brand sales 4 percent to 568 million euros, with casual wear providing double-digit growth.

By gender, men’s wear sales rose 4 percent to 568 million euros, while women’s wear sales fell 5 percent to 65 million euros. The downturn primarily involves women’s apparel under the Boss brand, and was related to the reduction of retail space in Boss freestanding stores, the group pointed out.

The group’s own retail store network now encompasses 439 doors, with seven stores opened and 11 closed. The first Hugo store with the brand’s new retail concept opened in Amsterdam in the second quarter, with further selected European openings planned for the second half of the year.

In other brand highlights, the Hugo collection was presented in a big rave bash in Berlin during Fashion Week in July, and Boss will feature both its men’s and women’s spring and summer 2019 collection in a combined show during New York Fashion Week.

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