BERLIN — Hugo Boss continued to make progress on its realignment path in the second quarter, booking currency adjusted sales growth of 3 percent and stable operating profit, as well as smoothing over the first quarter’s bump in own retail and online sales.
Net income more than quadrupled, reflecting a boost from other operating expenses and income related to store closures agreed upon in the group’s catalog of realignment measures.
The German fashion group confirmed its full-year forecast, which calls for stable sales and earnings in 2017. Boss said it will be pursuing its goal of growing sales and earnings in 2018, and that in 2019 and beyond, “assumes that sales will grow more strongly than the relevant market segment and that the operating margin will increase again.”
For the three months ending June 30, Boss reported net income of 57.6 million euros, up from 11.1 million euros the previous year. Earnings before interest and taxes jumped 423 percent to 80.6 million, while operating profit, or EBITDA before special items, matched last year’s level of 107.7 million euros.
Group sales rose a nominal 2 percent (3 percent on a currency adjusted basis) to 636 million euros. Boss own retail sales grew 5 percent, with retail comp sales up 3 percent, the first comp sales gain in seven quarters, and online sales rose 9 percent. Wholesale, on the other hand, fell 6 percent, burdened by delivery shifts compared to the prior year.
Geographically, currency-adjusted sales for Europe were flat in the period, whereas they rose 11 percent in Asia-Pacific, buoyed by a 14 percent upswing in China following the group’s move last year to harmonize prices in the country, chief executive officer Mark Langer said in a conference call on Wednesday.
He said business in the U.K. was also particularly strong, with tourism helping to generate double-digit gains. “We are experiencing no Brexit hangover, and expect the positive development [there] to continue,” he said.
Sales in the Americas gained 5 percent, and for the first time in two years, Boss reported a 2 percent uptick in sales in the United States, supported by both own retail and wholesale business. However, Langer noted this strong performance came against a particularly soft quarter the previous year, and for the full year, Boss expects group sales in the U.S. to remain in the red.
By brand and gender, the Boss brand grew sales 2 percent, while Hugo pushed ahead 6 percent. Men’s wear sales advanced 3 percent in the quarter, whereas women’s wear sales slipped 3 percent. The company noted men’s wear benefited from the favorable performance of the Hugo and Boss Green brands, the latter now incorporated into the Boss collection under the group’s two-brand policy.
As witnessed in the spring 2018 collections, the group is moving in a more casually driven direction, and ath-leisure or casualwear now accounts for 60 percent of Boss brand sales.
Boss has fairly ambitious plans for its own retail performance, and by 2021, aims to increase selling space productivity to 13,000 euros per square meter from the current level of about 11,000 euros. A new retail design is also in the works for both Boss freestanding stores and Hugo shops-in-shops.
As for the Boss stores, Langer said “we want to make them a bit more inviting in terms of atmosphere, and modern when it comes to material.” The new design will be launched in Geneva in the second half of 2017, with all new stores and renovated doors to reflect the fresh concept.
Some “very selected” openings for Hugo are planned already for the end of 2017, but Langer said the major expansion activity will be seen in the next 12-18 months based on a new shop-in-shop concept. “We will start in Europe, as we want to first walk before we start to run,” he said.
Following the publication of the second-quarter results, Boss shares were up 5.5 percent to 68.84 euros in the first hours of trading on the Frankfurt electronic exchange Xetra, continuing the share’s moderate upward trend since mid-July. Year to date, the stock is trading up 12.8 percent.