Hugo Boss Profit Beats Estimates as Wholesale Business Grows

Hugo Boss AG, the luxury-clothing maker controlled by Permira Advisers LLP, reported fourth-quarter operating profit that topped analysts’ estimates, driven by growth at its wholesale business and store openings.

Earnings before interest, taxes, depreciation, amortization and one-time items gained 42 percent to 138 million euros ($184.9 million), the Metzingen, Germany-based company said today. The average analyst estimate was 129 million euros, according to data compiled by Bloomberg. Sales rose 22 percent to 607 million euros. Hugo Boss said wholesale growth was “double-digit.”

“We expect own retail sales to benefit from new stores, franchise acquisitions and concession takeovers,” Claus Roller, an London-based analyst at Bank of America Merrill Lynch, wrote in a report to investors today. “Higher frequency of new product deliveries and a new pricing architecture should help gross margin.” He recommends clients buy the stock.

Hugo Boss has forecast full-year revenue of 3 billion euros and Ebitda of 750 million euros in 2015 as it opens more stores and expands in Asia and the U.S. The company plans to increase the size of its retail operations to 55 percent of revenue by 2015 from about 45 percent now.

“The positive business performance in 2012 has brought us a good step closer to achieving our medium-term targets,” Chief Executive Officer Claus-Dietrich Lahrs said in a statement today. “Despite the still-challenging market environment, I am confident that we will continue to post stronger growth than the overall market in 2013.”

Shares Gain

Hugo Boss shares gained 1 percent to 87.59 euros as of 10:10 a.m. in Frankfurt.

Fourth-quarter net income gained 30 percent to 70 million euros. The gross margin narrowed to 64.5 percent of sales in the fourth quarter from 66.2 percent a year earlier.

Hugo Boss shares jumped 45 percent last year, compared with a 34 percent increase for the MDAX index. Hugo Boss is trading at around 17 times its 2013 estimated earnings, according to data compiled by Bloomberg, while Prada SpA and Ralph Lauren Corp. are priced at about 22 times their estimated earnings. Hugo Boss’s discount compared with its premium-apparel peers isn’t justified, said Merrill Lynch’s Roller.

Buyout firm Permira, based in London, acquired a majority holding in the Valentino Fashion Group in 2007. Valentino was Hugo Boss’s parent company at the time.

(Updates with analyst in third paragraph, shares in sixth)
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