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Hugo Boss First-Quarter Profit Rises on Gain in Retail Sales

April 26 (Bloomberg) -- Hugo Boss AG, the German luxury-clothing maker controlled by Permira Advisers, said first-quarter operating profit gained 13 percent as retail sales rose.

Earnings before interest, taxes, depreciation, amortization and one-time items climbed to 148.4 million euros ($196.2 million) from 131.6 million euros a year earlier, the Metzingen, Germany-based company said in a statement today. The average estimate of nine analysts surveyed by Bloomberg was 148.9 million euros. Revenue rose to 606.8 million euros from 539.2 million euros, beating estimates.

“We had a good start to the year again,” Chief Executive Officer Claus-Dietrich Lahrs said in the statement. “The results for the first quarter show that we are fully on track to achieve our ambitious medium-term targets.”

Hugo Boss confirmed a forecast for sales to gain 10 percent this year and for Ebitda before special items to have a “slightly higher increase” compared with sales.

Chief Financial Officer Mark Langer told analysts on a conference call that growth rates in China will normalize and said he expects a more difficult environment in the Asia Pacific region. Hugo Boss will continue to “pursue growth opportunities aggressively” in China and sees growth there outperforming the group’s growth as the retailer plans to open 20 stores in its biggest market in Asia this year. Growth in Asia will be in line with the group’s growth this year, the CFO said.

Retail Growth

Hugo Boss has forecast sales of 3 billion euros and Ebitda of 750 million euros in 2015, with growth driven by expansion in Asia and the Americas. The clothier still gets almost two-thirds of sales from the European market, which Lahrs said last month will be more challenging in 2012. Economic confidence in the euro region declined more than economists had forecast in April, as the region’s slump showed signs of deepening, a report from the European Commission showed today.

Hugo Boss preferred shares fell 3 percent to 84.83 euros as of 3:28 p.m. in Frankfurt trading. The stock has risen 49 percent this year.

Retail growth helped boost the gross profit margin to 61 percent in the first quarter from 58.4 percent a year earlier, beating the 59 percent average estimate of five analysts surveyed by Bloomberg.

Hugo Boss plans to increase its own retail operations to 55 percent of revenue by 2015 from 45 percent now. Retail sales on a currency-adjusted basis rose 27 percent in the first quarter, while wholesale revenue gained 1 percent. On a comparable store sales basis, revenue gained 11 percent.

“I like the fact that Germany is still strong because it’s still their biggest market,” said Mark Josefson, an analyst at Silvia Quandt Research GmbH in Frankfurt. “There’s no real issue with the sales numbers, which are generally in line with expectations. Performance in retail was strong.”

Sales in Europe rose 9 percent, led by gains in the U.K. and Germany, Hugo Boss said. In Americas, revenue climbed 15 percent, boosted by U.S. sales, while the revenue increase in Asia was led by China.

Net debt declined to 141 million euros from 187 million euros. The company may be able to eliminate net debt as soon as next year, CFO Langer said in February.

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

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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