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(Bloomberg) -- For Hugo Boss AG investors, 2024 is a year to forget.
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The German fashion brand’s shares are down almost 40%, on track for their biggest decline in 16 years, lagging rivals like Burberry Group Plc in an already bad year for fashion retailers.
Chief Executive Officer Daniel Grieder issued his first profit warning mid-year, citing a glum spending outlook. The executive, who had revived sales by luring younger shoppers, is under scrutiny. And UK retail tycoon Mike Ashley, who has a track record of trying to shake up retailers he views as under-performing, may look to place an executive on the board.
Since Hugo Boss — a premium brand that Grieder revamped — cut its operating profit and sales outlook in July, it’s become one of the most shorted stocks among European luxury peers.
Shares out on loan, an indication of short interest, represent almost 14% of Hugo Boss’s free float, according to the latest data from S&P Global Market Intelligence.
Pink Skirts
Grieder’s efforts to lure younger shoppers paid off initially, but as Hugo Boss started pushing out items like a sequined pink mini skirt that costs €169.95 ($178), it has exposed itself to a more price-conscious customer.
“This clientele is probably hit harder by the challenging macro environment,” said Cedric Rossi, an analyst at Bryan, Garnier & Co. “The more high-end you are, the better it is at the moment.”
Inflation has strained shoppers, affecting even the most exclusive luxury brand owners like LVMH. Some 70% of those surveyed by the Business of Fashion and McKinsey & Co. said they will continue to shop at off-price retailers and outlets over the next twelve months, according to the firms’ The State of Fashion 2025 report.
“The brand turnaround remains a work in progress,” Swetha Ramachandran, a fund manager at Artemis Investment Management, said in an interview.
With some €1.8 billion wiped out from its market value this year, Hugo Boss shares are now so low some analysts say it could be time to buy. The stock trades at about 11 times expected earnings, according to data compiled by Bloomberg. That makes it about 15% cheaper than Europe’s benchmark Stoxx 600 Index.
The shares also have the greatest return potential among European peers like Burberry, according to twelve-month price targets compiled by Bloomberg.
However, the near future for Hugo Boss and Grieder could be complicated by more than just cash-strapped customers.