Hugo Boss recorded another quarter of sluggish growth between July and September, blaming the macroeconomic environment. Sales at the German company inched up 1 percent on a currency adjusted basis during the third quarter 1.03 billion euros.
As a result, company executives asked for patience when it came to mid-term goals that chief executive officer Daniel Grieder had planned as part of the “Claim 5” strategy he introduced in 2021. The goal was for the previously moribund premium clothing company to be bringing in 5 billion euros annually by 2025.
“We are firmly convinced we will achieve this goal,” Hugo Boss’ chief financial officer Yves Mueller told journalists during a telephone conference in Germany on Tuesday morning. “But we must acknowledge that the macroeconomic situation is currently very volatile and still very uncertain. We will reach 5 billion but it’s open as to exactly when.”
Hugo Boss blamed its sluggish growth on economic conditions and consumer sentiment, which have put a dent in sales of many luxury brands. And the company pointed out that it was in fact still growing. Over the first nine months, Hugo Boss saw 2 percent sales growth, on a currency adjusted basis, it said, to 3.06 billion euros. Over the same period last year, Hugo Boss’ sales stood at 3.02 billion euros.
“If you look at our business development this year, broken down into individual quarters…you could say that sales have now stabilized at a fairly low level and [that is why] we have a more cautious outlook,” Mueller said.
Hugo Boss was also still gaining brand recognition, Mueller added, noting that Hugo Boss’ recent fashion show in Milan had racked up 400 million views on social media, a company record.
Boss menswear, its largest segment, grew 1 percent on a currency adjusted basis to 785 million euros in the third quarter. Boss womenswear grew 2 percent to 74 million euros. More casual looks, sold under the Hugo brand, grew 2 percent to 171 million euros. This was also supported by the recent launch of Hugo Blue, a new denim line, the company stated.
Revenues in Hugo Boss’ home market of Europe rose 1 percent to 662 million euros.
This was mainly due to good sales in Germany, Mueller explained. Sales in the U.K. and France had been weaker, with events like the Olympic Games in Paris over summer impacting demand there.
Hugo Boss recorded 4 percent growth in the Americas to 228 million euros.
Mueller attributed this to Hugo Boss’ increasing profile in the U.S. and increased interest from younger American consumers, due to the brands’ repositioning and collaborations with sporting organizations like the National Football League.
Currently only between 3 and 5 percent of Hugo boss products are produced in the Americas, but the company is also planning to do more “near sourcing.” It has been looking into suppliers in Mexico and Honduras, Mueller disclosed.
“We are now testing the first products there,” he said. “But that’s not something that can be changed overnight.” Quality, environmental and social standards have to be met, he noted.
In Asia-Pacific, sales fell 7 percent to 110 million euros.
“You have probably already heard this from other well-known companies,” Mueller told journalists. “Whether that’s clothing, jewelry, watches or cars, China is currently an extremely difficult market. Above all, the ongoing crisis in the real estate market there is causing lasting uncertainty among Chinese consumers.”
After the announcement of second-quarter results this year, there had been much talk about cost-cutting and Grieder said Hugo Boss had made progress in that area.
Given macroeconomic pressures, “we are concentrating on what we can control ourselves,” Mueller noted.
“By further leveraging our global sourcing activities and rigorously executing our cost measures introduced earlier this year, we have improved productivity…and supported our bottom-line development,” Grieder said in a statement.
While operating costs fell slightly, so did Hugo Boss’ EBIT, or earnings before interests and taxes. These dropped 7 percent to 95 million euros. But this was an improvement on the second quarter when Hugo boss saw EBIT drop by 42 percent. EBIT was also better than market expectations, beating these by about 6 percent.
Market analysts from the likes of JP Morgan, Goldman Sachs, Baader Bank and the Royal Bank of Canada were upbeat about the better-than-expected EBIT results. Most argued that, given general weakness in the luxury industry, Hugo Boss’ results could be seen as comparatively positive even if the future looked uncertain.
Hugo Boss confirmed its guidance for the full year. Earlier in the year it had already lowered guidance once, trimming 2 percentage points off sales growth projections. Now it still expects group sales to increase somewhere between 1 and 4 percent by the end of the year and to come in between 4.2 billion and 4.35 billion euros. The company also expects its 2024 EBIT to end up on a fairly broad scale, somewhere between a fall of 15 percent and an increase of 5 percent.
