Hugo Boss Plunges as Retailer Cuts Outlook on U.S., China

  • Shares fall 20 percent in Frankfurt, most since Oct. 2008
  • Company is limiting distribution in U.S. and adjusting prices

Hugo Boss AG’s shares plunged after the German clothier said its profit will decline by at least 10 percent this year due to weaker-than-expected sales in the U.S. and China.

Earnings before interest, taxes, depreciation and amortization and excluding special items will decline by a “low double-digit” percentage this year, the Metzingen, Germany-based company said in a statement. The company also won’t reach its goal of an adjusted operating margin of 25 percent. The shares fell 20 percent to 56 euros in Frankfurt, the biggest drop since Oct. 2008.

Sales in company-operated stores this year have been weaker than expected, mainly in the U.S. and China, Boss said. Analysts had expected a 1 percent decline in Ebitda this year, according to estimates compiled by Bloomberg. To stem slowing sales, Boss is curtailing distribution at U.S. retailers, where the company cited “highly promotional” levels of discounting. It’s also adjusting prices in Asia.

“The key is they’ve abandoned the EBITDA target and this is related to visibility in future years, too,” said Zuzanna Pusz, an analyst at Berenberg in London. “People don’t really know what the target is anymore.” Boss hit its sales goals last year through discounting, which is at odds with the brand’s luxury positioning, she said.

Hugo Boss, best known for men’s apparel such as suits and jackets, joins other luxury companies in feeling the fallout from sluggish demand in China. The revision is the second in less than six months for the German fashion label, which in October cut its sales and earnings forecast for the year due to lackluster performance in China and the U.S.

The company plans to present its full-year financial results March 10.

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