Hugo Boss Keeps 2013 Earnings Target as Retail Revenue Advances

Hugo Boss AG reiterated its earnings forecast for the year after the German luxury-clothing maker said its retail business increased sales by 14 percent in the first quarter as it opened more outlets.

Retail revenue climbed to 278.7 million euros ($367 million) from 244.3 million euros a year earlier as the retail network was expanded by 36 locations to 876, the Metzingen, Germany-based company said in a statement today. Total sales fell 2 percent to 593.5 million euros as wholesale revenue dropped to 301.9 million euros from 350.4 million euros.

“With a better performance of the wholesale business in the further course of this year, we shall return to renewed growth in the second quarter,” Chief Executive Officer Claus-Dietrich Lahrs said in the statement. “The market environment proved to be very challenging in the early months.”

Retail sales, which exceeded wholesale in 2012 for the first time, will be the “growth engine” this year, Lahrs said in March. Hugo Boss, which sells men’s suits for 400 euros and women’s pumps for 200 euros, doubled its number of collections to one per season. The company posted a 21 percent increase in fourth-quarter revenue at its wholesale business partly because of the switch to four fashion lines a year, it said in February.

The shares rose 1.2 percent to 89.45 euros as of 10:53 a.m. in Frankfurt. The stock has gained 12 percent this year, compared with the benchmark MDAX Index’s 13 percent gain.

Growth Opportunities

“We expect same-store sales to improve sequentially in the second to fourth quarters on easier comparatives and gradual macro improvement,” Thomas Chauvet, an analyst at Citigroup Inc. with a buy recommendation on Hugo Boss, wrote in a note today. “We see long-term opportunities in retail expansion in Asia and the U.S., product diversification and sales productivity improvement.”

Earnings before interest, taxes, depreciation, amortization and special items are forecast to rise at a high single-digit rate this year, the retailer, controlled by buyout firm Permira Advisers LLP, reiterated today.

First-quarter operating profit fell 11 percent as Hugo Boss changed its collection cycle and economic conditions remained difficult in Europe.

Ebitda before one-time items fell to 132.6 million euros from 148.4 million euros a year earlier. The average estimate of nine analysts surveyed by Bloomberg was 135.1 million euros.

Revenue adjusted for currency effects gained 1 percent in Asia while sales in Europe dropped 5 percent. Hugo Boss still expects sales adjusted for currency effects to rise at a high single-digit rate this year.

Hugo Boss aims for revenue of 3 billion euros and Ebitda of 750 million euros in 2015, with the retail business representing about 55 percent of revenue by that year.

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 about 66 percent of Hugo Boss, according to data compiled by Bloomberg. The stock price has more than doubled since the end of 2007.