Sportier Hugo Boss expects sales uplift but capex to dent profit
today Mar 8, 2018
German fashion house Hugo Boss expects sales growth to accelerate in 2018 thanks to a shift to add more sportswear and casual styles but is more cautious on profit as it keeps up investment in revamping stores and its website.
Since the departure of Claus-Dietrich Lahrs as CEO in 2016 after a string of profit warnings, new chief Mark Langer has sought to return Hugo Boss to its roots, selling premium men's clothing, while moving away from Lahrs' push into luxury and the women's market.
Under Langer, the maker of slick men's suits has also closed loss-making stores, revamped others and reduced prices in China.
"We want to step up the pace of growth," said Langer on Thursday, a day after having his contract extended by three years to December 2021. "The new Boss and Hugo collections are being very well received."
Hugo Boss, which had already reported a 5 percent increase in currency-adjusted fourth-quarter sales, said that net income in the period fell by 29 percent to 45 million euros (40.2 million pounds), missing analyst forecasts for 59 million euros.
Boss forecast sales and net profit to rise in a low to mid single-digit percentage range in 2018, while it will increase capital expenditure to between 170 million euros and 190 million euros from 128 million in 2017.
Analysts had on average forecast a rise in sales of about 2 percent in 2018 but a 12 percent increase to net profit.
Hugo Boss shares, which have gained 9 percent over the past year, were indicated 4 percent down in pre-market trade.
The firm expects growth to accelerate in the second half of the year, noting that its "sports tailoring" collection was well received at New York Fashion Week in February, with order trends for Fall/Winter better than for Spring/Summer.
Sales growth should be led by the Chinese market, followed by Europe, with the Americas lagging but still growing, the company said, adding that its wholesale business will return to growth in 2018.
The luxury goods industry, including market leader LVMH and Gucci-owner Kering, has been benefiting from a recovery in demand from Chinese consumers.
Menswear fourth0-quarter sales rose by a currency-adjusted 6 percent in the period while womenswear fell 3 percent. Hugo Boss announced in February that it is ending a partnership with designer Jason Wu, who led a push to expand its women's collections from 2013.
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