Hugo Boss reins in costs and beats profit estimate

Gdansk — Hugo Boss beat first-quarter operating profit expectations on Thursday as it managed to rein in costs while still investing in its brand and products to boost sales.

However, demand in some markets such as China and Britain continued to deteriorate, CFO Yves Mueller said in a media call.

First-quarter sales in Greater China, including Hong Kong, Macau and Taiwan, declined by a high single-digit percentage from the same period a year earlier, when they were boosted by the economy reopening from pandemic-related lockdowns.

The company still aimed to grow in the region and increase its contribution to group sales, which was at about 8%, Mueller said. In contrast, Hugo Boss said it gained market share in the US, with double-digit growth.

The company’s outlook for 2024 disappointed in March as it warned of slower sales growth and a profit below analyst estimates, after unfavourable currency moves and price competition dampened an improvement in margins at the end of 2023.

The German fashion house posted a 6% rise in first-quarter earnings before interest and taxes to €69m, edging the €65m expected by analysts.

“This small (profit) beat might provide relief to the shares this morning; however we think that the sales mix and the source of the beat are not the best of quality and hence we would not chase a rally,” JPMorgan analysts wrote in a note to clients.

Hugo Boss shares rose almost 4% at the open, but had reversed course to trade down 4.8% at €48.1 by 8.47am GMT, bringing losses so far this year to 28%.

Efficiency gains in sourcing as well as more favourable product and freight costs helped offset promotional costs and negative currency effects in the quarter, the company said. Currency-adjusted group sales also rose 6% to €1.01bn, reflecting growth in its BOSS and HUGO brands, it said.

Reuters