Hugo Boss Q3 sales fall by 3 percent
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Hugo Boss currency-adjusted sales fell by 3 percent in the third quarter. Due to negative currency effects, the company recorded a sales decrease of 6 percent to 703 million euros (778 million dollars).
“The third quarter has not been an easy one,” commented Mark Langer, CEO of Hugo Boss, adding, “However, we are on an upward trend in China now. All the measures we have taken to protect profitability in the current year are on plan or even ahead. It's now about gearing Hugo Boss towards sustainable growth. This is what we're targeting in our realigned strategy, to be unveiled shortly.”
Hugo Boss witnesses positive growth in China
Sales in Europe declined by 2 percent, which the company said were impacted by adverse market conditions. Sales in Great Britain grew by 5 percent after adjusting for currency effects. In France and the Benelux countries, sales decreased by mid to high single-digit percentage rates. Sales in Germany trailed the previous year by 10 percent. Sales in the Americas decreased by 9 percent in local currencies due to a decline of 14 percent in the US market, where the company said it intentionally limited distribution of its Boss core brand in the wholesale channel in order to move away from brand-damaging discount campaigns. Double-digit growth rates in Central and Latin America only partly offset the decline in the US.
Sales in Asia were down by 3 percent in local currencies on the previous year. Affected by ongoing decreases in Hong Kong and Macao as well as store closures, currency-adjusted sales in China were 4 percent lower than the previous year. However, sales increased on a like-for-like basis, breaking the negative trend of previous quarters. Higher volumes more than offset the effects of closer alignment of the local price architecture to price levels in Europe and America.
Currency-adjusted sales in the Group’s own retail business including outlets and online stores rose by 2 percent. On a comp store basis, however, currency-adjusted retail sales decreased by 6 percent. The Group’s own online business decreased by 15 percent after adjusting for currency effects in the third quarter.
Third quarter wholesale sales were 11 percent below the prior-year level on a currency-adjusted basis due to the distribution clean up in the US as well as subdued global demand. The Group’s gross profit margin increased by 20 basis points to 64.7 percent. EBITDA before special items fell by 14 percent and net income decreased by 9 percent to 81 million euros (89 million dollars).
Europe remained strongest sales region in the first nine months
The Group recorded a sales decline of 2 percent in local currencies in the first nine months of 2016. As a result of negative currency effects, this corresponds to a decrease of 4 percent in the reporting currency to 1,968 million euros (2,183 million dollars). Sales in Europe increased by 1 percent, with strong trading in Great Britain. In the Americas, sales in local currencies fell by 10 percent.
Growth in Central and Latin America as well as Canada only partly offset the decrease in the US. In Asia, sales were down 5 percent on the prior year after adjusting for currency effects. China recorded a decline of 11 percent. The Group’s own retail business posted a 1 percent increase in sales excluding currency effects. On a comp store basis, currency-adjusted sales were down by 7 percent on the previous year. Wholesale sales declined by 8 percent in local currencies.
At 65.4 percent, the gross profit margin was unchanged on the previous year. EBITDA before special items fell by 18 percent, mainly due to the lower sales. The consolidated net income attributable to equity holders of the parent company fell by 45 percent to 130 million euros (144 million dollars).
Hugo Boss reaffirms full year outlook
The Managing Board expects sales to remain stable or fall by up to 3 percent on a currency-adjusted basis in the year as a whole. Own retail sales will be bolstered largely by the expansion of the Group’s store network. On a comp store basis, trends are expected to be negative. Wholesale sales are forecast to contract by up to 10 percent. Overall, the gross profit margin should remain stable in 2016 compared to the previous year.
The company expects the operating result (EBITDA before special items) to decline by between 17 percent and 23 percent. The company said, earnings will be supported by cost savings higher than originally planned, largely as a result of renegotiations of rental leases in the own retail business, strict cost management in administration, and streamlining of marketing activities.
In Brief- Full year sales expected to remain stable or fall by up to 3 percent on a currency-adjusted basis.
- EBITDA expected to decline between 17 percent and 23 percent. .
Picture:Boss