Since May, when Mark Langer was appointed CEO, Hugo Boss has been on a mission to return to growth, closing unprofitable stores and aiming to reposition towards its core business – men’s tailoring.
Like many other designer brands, Hugo Boss was caught off guard by the length and depth of a sales slump in the once popular Asian shopping cities of Hong Kong and Macau. The group has also been battling weak demand in the US.
In its latest statement on Wednesday, however, the company said there had been an improvement in sales trends in China. It said:
Sales in Asia were down by 3% in local currencies on the previous year. Affected by ongoing decreases in Hong Kong and Macao as well as store closures, currency-adjusted sales in China were 4% lower than the previous year. However, sales increased on a like-for-like basis, breaking the negative trend of previous quarters.
Sales in Europe as a whole dropped 2 per cent in the three months but Britain was one bright spot with sales up 5 per cent, after adjusting for currency effects. A number of luxury groups have warned that weak tourism numbers following a spate of terror attacks over the past year have hampered their sales on the continent.
In the third quarter, the gross profit margin benefited from a reduction of discounts in all sales channels. This more than offset negative currency effects. In sum, the Group’s gross profit margin increased by 20 basis points to 64.7% (Q3 2015: 64.5%).
Operating expenses were reduced slightly due to strict cost management. As a result of lower sales, however, EBITDA before special items fell by 14% to EUR 145 million (Q3 2015: EUR 168 million). Accordingly, the adjusted operating margin shrank by 200 basis points to 20.6% in the third quarter (Q3 2015: 22.6%). The Group’s net income decreased by 9% to EUR 81 million (Q3 2015: EUR 89 million).
Hugo Boss on Wednesday reaffirmed its full year guidance. It expects sales to be flat or fall by up to 3 per cent on a so-called constant currency basis while its gross profit margin should “remain stable” compared to the previous year. Ebitda before exceptional costs is expected to drop by up to 23 per cent.
However, it added that it expects to save up to €65m this year, €15m more than planned.
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