Hugo Boss Quarterly Earnings Miss Forecasts on Wholesale

Hugo Boss AG (BOSS), the German luxury clothing-maker, reported earnings that missed analysts estimates as a difficult market environment in China and a weakening wholesale business offset higher retail sales.

Third-quarter earnings before interest, taxes, depreciation, amortization and one-time items rose 5 percent to 173.1 million euros ($237.3 million), Metzingen-based Hugo Boss said in a statement today. The average estimate of 11 analysts in a Bloomberg survey was 174.1 million euros.

“Hugo Boss has systematically addressed the difficult market environment,” Chief Executive Officer Claus Dietrich Lahrs said in the statement. “Demand in our own stores picked up noticeably in the third quarter compared to the first half year. We are therefore anticipating strong growth in sales and earnings in the fourth quarter.”

Hugo Boss also adjusted its full-year sales forecast, saying revenue on a currency-adjusted basis will rise 6 percent to 8 percent this year, with operating profit increasing at a similar rate. The company previously expected revenue adjusted Ebitda to rise at a high single-digit rate this year.

The market environment in China remains “tense,” Hugo Boss said. Competitor Kering SA said this month that sales at its Gucci luxury-goods unit in China fell in the third quarter. Prada SpA, the Italian owner of the Miu Miu and Church’s luxury brands, reported first-half profit that missed estimates last month as demand for luxury goods cooled in China, the world’s second-largest economy.

Revenue Rises

Third-quarter sales rose 1.8 percent to 657.9 million euros. The average estimate of 15 analysts was 674.9 million euros. Wholesale revenue dropped 8 percent, adjusted for currency effects, while retail sales gained 23 percent on the same basis.

The gross margin, the proportion of sales left after subtracting production costs, rose to 63.5 percent from 60.1 percent, Hugo Boss said.

The retailer is targeting revenue of 3 billion euros and Ebitda of 750 million euros in 2015, with the retail business representing at least 55 percent of revenue by then.

Hugo Boss shares rose 0.6 percent to 94.26 euros in Frankfurt trading yesterday. The stock has gained 18 percent this year.

Hugo Boss is controlled by Permira Advisers LLP. Permira, based in London, acquired in 2007 a majority holding in Valentino Fashion Group SpA, Hugo Boss’s parent company at the time. The private-equity firm owns about 56 percent of Hugo Boss after selling a 10 percent stake in an accelerated bookbuilding in May.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.