Hugo Boss Q1 sales improve but earnings decline

In the first quarter, Hugo Boss increased currency-adjusted sales by 1 percent and 2 percent in reporting currency to 664 million euros (744 million dollars). However, the company said that in the Americas, the challenging US market and the ambitious comparison base of the prior year in particular led to a currency-adjusted sales decline of 8 percent, while currency-adjusted sales in Asia increased by 4 percent. Overall, retail sales on a comp store basis increased by 4 percent in the first quarter and group’s own online business saw currency-adjusted growth of 26 percent. However, sales in the wholesale business decreased.

“The ongoing momentum in our strategic growth market China and in the important online business shows that our strategy is taking effect,” said Mark Langer, CEO of Hugo Boss Ag in a statement, adding, “At the same time, the US market proved to be weaker than expected. Moreover, investments in the digitization of our business model and in the organizational structure weighed on our operating result in the first quarter. However, I am very confident that we will achieve our targets for the full year and beyond.”

Despite decline in earnings, Hugo Boss confirms full year outlook

At 55 million euros (61.6 million dollars), the operating profit (EBIT) was 22 percent below the prior year’s level. Despite the decline in earnings in the first quarter, Hugo Boss has confirmed its sales and earnings outlook for the full year 2019. The group continues to expect currency-adjusted sales to increase at a mid-single-digit percentage rate in 2019 driven by the group’s own retail business, which is expected to contribute with comp store sales growth in the mid-single-digit percentage range, adjusted for currency effects. In addition, the group expects the intensification of partnerships with online retailers in the concession model and the renovation of strategically important Boss stores over the course of the year to significantly drive growth.

For the remainder of the year, Hugo Boss expects a substantial acceleration in earnings development. Positive effects from the reorganization measures completed in the first quarter and the offsetting of phasing effects related to marketing expenses are expected to contribute to this. In addition, the efficiency program launched in November is expected to yield its first positive results. For 2019, the company therefore continues to expect EBIT to increase at a high single-digit percentage rate with the predicted increase in gross profit expected to contribute to this.

Hugo Boss results differed across core geographies

In the first quarter, Hugo Boss said, sales developed differently by region. While the group recorded sales growth in Europe and the Asia/Pacific region, the challenging market environment in the US negatively impacted business in the Americas. Overall, sales in the US were down by 10 percent on a currency-adjusted basis. In Canada, sales also were below the prior year level. By contrast, Latin America recorded growth at a mid-single-digit percentage rate.

In Europe, sales growth in the group’s own retail business was partially compensated by a decline in the wholesale business. The latter was negatively impacted by delivery shifts compared to the prior year. In Great Britain, Hugo Boss recorded currency-adjusted sales growth of 5 percent and against the background of the ongoing challenging market environment in Germany, sales developed stable there. In the Benelux countries, the company said, sales were also at the prior year’s level. In France, sales growth in the group’s own retail business could not compensate for a decline in the wholesale business. Overall, sales in France were 7 percent below the prior year level.

Sales in the Asia/Pacific region once again developed positively in the first quarter. In Mainland China, Hugo Boss recorded double-digit growth on a comp store basis, but in Hong Kong and Macau, however, the market environment was more challenging. Overall, sales in China grew by 4 percent on a currency-adjusted basis. With currency-adjusted high single-digit sales growth, Japan and Southeast Asia also contributed to growth in the region.

On a comp store and currency-adjusted basis, sales grew by 4 percent. In Europe and Asia/Pacific, the group achieved growth at mid-single-digit and high single-digit percentage rates, respectively. In the Americas, however, sales declined slightly on a comp store and currency-adjusted basis. Overall, sales in the group’s own retail business in Europe were up 5 percent on a currency-adjusted basis and came to 221 million euros (247.6 million dollars). Sales in the Americas amounted to 78 million euros (87.4 million dollars), a decline of 4 percent on a currency-adjusted basis. In Asia/Pacific, currency-adjusted sales grew by 4 percent to 99 million euros (111 million dollars).

In the first quarter, sales of the Boss brand were on the prior year level. Sales growth in casualwear and athleisurewear compensated for a slight decline in sales in businesswear. The company said, Hugo brand benefited from double-digit sales growth in casualwear. This development was partly compensated by declining sales in businesswear. Sales in menswear were slightly above the prior year level due to growth in casualwear and athleisurewear, the company attributed decline in sales in womenswear to lower sales from businesswear and that growth in casualwear could only partially compensate for this.

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