Hugo Boss Forecasts Earnings Growth to Decelerate in 2013

Hugo Boss AG, the German luxury-clothing maker controlled by buyout firm Permira Advisers LLP, said operating profit will probably rise at a slower pace than last year as 2013 will be challenging.

Earnings before interest, taxes, depreciation, amortization and one-time items will rise at “high single-digit rate” in 2013, slowing from last year’s 13 percent pace, the Metzingen-based company said today. Retail sales will be the “growth engine” as they grow by more than 10 percent, Chief Executive Officer Claus-Dietrich Lahrs said in a Bloomberg television interview with Mark Barton on Countdown.

The maker of men’s suits said it will spend more this year to expand its own store network after sales from retail exceeded wholesale for the first time in 2012. Hugo Boss increased the number of stores it operates itself by 35 percent to 840 last year, adding outlets in Brussels, Toronto and Melbourne.

“We recommend taking profits,” Andreas Riemann, an analyst at Commerzbank AG, wrote in a report today, downgrading the stock to hold from buy. He cited share price gains and a boost to December wholesale revenue that formerly would be recorded in January. “First-quarter 2013 results should not serve as a positive catalyst for the share.”

2015 Forecast

Hugo Boss shares traded 1.5 percent lower at 89.05 euros as of 12:32 p.m. in Frankfurt trading after previously dropping as much as 5.2 percent. The stock is up 12 percent this year and reached a record 92.36 euros two days ago. Berenberg Bank expected 2013 Ebitda before special items to rise 10 percent to 584 million euros, while HSBC Holdings Plc forecast it will increase 13 percent to 597 million euros, according to estimates compiled by Bloomberg.

The euro-area economy will contract for a fourth straight quarter in the first three months of 2013, according to a Bloomberg survey of economists. The region’s economy shrank the most in almost four years in the fourth quarter of 2012. Hugo Boss gets the majority of its revenue from Europe.

The company maintained its forecasts for revenue of 3 billion euros and Ebitda of 750 million euros in 2015 as it increases sales in Asia and the U.S. The clothing retailer said the retail business will represent about 55 percent of revenue by that year as it opens about 50 stores annually.

The wholesale business will be “approximately stable” this year, Hugo Boss said.

Dividend Miss

The retailer said yesterday it will increase its dividend 8 percent to 3.12 euros a share for 2012, missing a 3.20 euro Bloomberg forecast.

Hugo Boss reported fourth-quarter operating profit and sales that topped analysts’ estimates last month. Sales rose 24 percent in Europe in the fourth quarter while revenue from the Americas gained 18 percent, Hugo Boss said today.

Net debt fell to 130 million euros at the end of 2012 from 149 million euros the year before, Hugo Boss said.

Permira, based in London, acquired a majority holding in Valentino Fashion Group SpA in 2007. Valentino was Hugo Boss’s parent company at the time. Permira owns a stake of about 66 percent in Hugo Boss, according to data compiled by Bloomberg. The stock price has more than doubled since the end of 2007.

(Updates with analyst estimates in sixth paragraph.)
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