Hugo Boss Sees Sales Rebound Gathering Pace as U.S. Strengthens

Hugo Boss AG’s sales rebound will gather pace in the second half of 2010 as its U.S. business benefits from a shift by customers toward less-expensive luxury items, according to Chief Financial Officer Mark Langer.

Revenue growth in the period will come close to the German clothing maker’s 8 percent long-term forecast through 2015, Langer said in an interview at the company’s Metzingen headquarters. Sales rose 6.9 percent in the second quarter, after falling 8.2 percent in the year’s first three months.

“We don’t see any order reluctance at our retail partners in the U.S. and our own stores are also showing growth,” Langer said, adding that Boss is gaining market share in the country.

Price-conscious U.S. consumers are turning to Hugo Boss men’s suits, which from as little as $695 are at the lower end of the luxury spectrum, according to Langer. The clothier gets 17 percent of revenue from the country, where store sales missed analysts’ estimates last month as consumers restricted spending. Competitor J. Crew Group Inc. cut its profit forecast last week.

Boss’s wholesale division, which accounts for about 60 percent of the clothier’s revenue, has sufficient orders from retailers for the next six months, Langer said.

“Stores made good business with this year’s summer collection, encouraging them to order our 2011 collection,” Langer said. Women’s wear is selling “very well,” he said.

China Expansion

Hugo Boss, controlled by buyout firm Permira Advisers LLP, started an online business in the U.S. this year to expand its retailing unit. The company, which also sells online in the U.K., Germany, France and the Netherlands, expects sales of more than 10 million euros ($12.7 million) this year through the internet and wants to increase that figure to as much as 60 million euros by 2013, Langer said.

Sales growth is also set to accelerate in China, where Hugo Boss started a joint venture with local fashion retailer Rainbow Group last month, the executive said. Sales in the world’s most populous country rose 54 percent to 40 million euros in the first six months of the year. Boss plans to open as many as 20 stores in China during the remainder of 2010, compared with a worldwide total of 50 additional outlets for the year.

The Chinese joint venture and store openings reduced the proportion of wholesale revenue from 70 percent and brought the company closer to its target of less than 50 percent.

Sales in some European countries including Spain and Italy will remain sluggish, while orders from Russian retailers in Moscow and St Petersburg have started rising again, Langer said.

The executive repeated a forecast for revenue growth of as much as 5 percent on a currency-neutral basis this year. Earnings before interest, taxes, depreciation and amortization are projected to rise as much as 12 percent this year.

Hugo Boss preferred shares have risen 37 percent this year in Frankfurt, beating a 7 percent increase in Germany’s MDAX index of medium-sized companies.

To contact the reporter on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net.

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