Hugo Boss Sales Miss Estimates Amid Slack Luxury DemandAaron Ricadela
Hugo Boss AG reported fourth-quarter sales and profit that missed estimates as the German clothier contended with sluggish demand for high-priced fashion in economically stagnant Europe.
The shares tumbled after Metzingen, Germany-based Boss said revenue rose 5 percent to 684 million euros ($783.9 million), compared with the average estimate of 699.4 million euros. Earnings before interest, tax, depreciation and amortization gained 6 percent to 167 million euros, excluding special items. Analysts had expected 172.8 million euros.
“The company couldn’t entirely extract itself from the negative fashion sales trend in Germany,” Kepler Cheuvreux analyst Juergen Kolb wrote in a note to clients. Business in the U.S. and China was also “tougher than expected,” he said.
Chief Executive Officer Claus-Dietrich Lahrs is opening more Boss-branded stores in Asia and the Middle East to compensate for slowing western demand for luxury goods. The maker of narrow-cut suits and Jason Wu-designed dresses -- a bright spot in its line-up -- expects another challenging year.
“2015 will not become any easier in light of the many economic and political uncertainties,” Lahrs said today.
Boss shares fell as much as 5.7 percent, the most since Nov. 4 when the company lowered its 2014 targets. They were 4 percent lower at 109.05 euros as of 9:56 a.m. in Frankfurt.
Goldman Sachs Group Inc. this week said the European luxury industry will be in “transition” this year, trimmed its forecast growth rate and advised clients to sell Boss shares. Boss’s former controlling shareholder, Permira Holdings Ltd., cut its stake in December for the third time in a year.
The clothier is targeting high single-digit percentage sales growth in coming years by focusing on emerging markets as the sluggish economy in Europe and political unrest in Ukraine hurt luxury consumption on the continent and in Russia.
A weaker euro is likely to boost reported sales this year after helping sales growth in the fourth quarter, according to Charles Allen, a Bloomberg Intelligence analyst in London.
Boss said today it’s taking over 17 Korean stores it had managed through a partner as of March 1 to capitalize on tourism and a “booming” womenswear market. It’s setting up its own distribution company in Dubai and taking over all its stores in China, where it will operate 130 outlets.
For the full 2014 fiscal year, Boss sales were 2.6 billion euros, representing growth of 6 percent on both a statutory and currency-adjusted basis. In November, the company projected a gain of 6 percent to 8 percent, excluding currency effects.
Pretax profit for the year was 1 percent higher at 437 million euros, including a 19 million-euro charge related to taking over its Middle East business.
The company will report its full 2014 results on March 12.
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