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Strategic realignment boosts Q1 sales at Hugo Boss

By Prachi Singh

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Business

Hugo Boss currency-adjusted sales grew 1 percent in the first quarter to 651 million euros with positive development in Europe and Asia. The company said EBITDA before special items increased by 4 percent to 97.4 million euros. Hugo Boss has reconfirmed its full year financial outlook.

“We’ve made a solid start to the current fiscal year. In Europe and Asia especially, we’ve been heading in a positive direction. Our strategic realignment is coming along well, and in some areas it’s already proving a success. I am convinced that, after this year of stabilization, we will return to profitable and sustainable growth,” said Mark Langer, Chairman of the Managing Board of Hugo Boss in a media statement.

Hugo Boss initiates measures for growth

In the second half of the year in particular, the company plans to expand its offering in the entry-level price range and strengthen its collection in the casualwear section. The company aims to initiate a comprehensive set of measures primarily focused on increasing customer footfall and commercially optimizing the hugoboss.com website is intended to bring the e-commerce business back on course towards growth. Correspondingly, the company expects sales in the group’s own retail business to increase during the rest of the year.

The company said its forthcoming spring/summer 2018 collection will be the first to reflect the future concentration on the Boss and Hugo brands. Additionally, both brands will put on their own fashion shows – Hugo at the Pitti Immagine Uomo in Florence in mid-June and Boss at the New York Fashion Week in July.

The company’s sales in Europe increased by 3 percent in local currencies driven by increased local demand and a recovery in business with tourists. Sales in Great Britain grew by 7 percent. Hugo Boss said, growth in the wholesale channel led to a slight increase in sales in Germany, whereas sales in France and the Benelux declined due to the ongoing challenging market environment in the apparel sector.

The sales development in the Americas was attributable in particular to a decline in sales of 7 percent in the United States, where, in the second quarter of 2016, the company began to limit the distribution of its Boss core brand in the wholesale channel. The group also recorded declines in sales in Canada and Latin America.

Sales development in the Asia region, the company said, benefited from the ongoing upswing on the Chinese market. Sales in China rose by 3 percent. With double-digit sales growth on a like-for-like basis the Chinese mainland was significantly better than Hong Kong and Macau, Hugo Boss added.

Retail sales remain stable in the first quarter

Sales in the Group’s own retail business (including outlets and online stores) remained stable during the first quarter. On a like-for-like and currency-adjusted basis, sales declined by 3 percent, mainly due to falls in the mid-single digit range in the Americas region. Whereas like-for-like sales in the Asia/Pacific region remained stable, in Europe they were in the low single-digit range below the prior-year level.

Overall, sales in the group’s own retail business in Europe totalled 205 million euros (223 million dollars) against 210 million euros (229 million dollars) in the first quarter of 2016. The Americas region, on the other hand, recorded a currency-adjusted decrease in sales of 3 percent to 77 million euros (84 million dollars). In Asia, sales grew by 4 percent in local currencies to 90 million euros (98 million dollars).

Sales in freestanding stores and outlets were 1 percent and 7 percent above the prior year’s figures respectively on a currency-adjusted basis, whilst sales in shops-in-shops declined by 3 percent. Sales in the Group’s own online business declined by 27 percent. With 207 million euros (226 million dollars), sales in the wholesale business in Europe were 7 percent higher than in the prior year. In the Americas, sales on a currency-adjusted basis fell by 12percent to 49 million euros (53 million dollars). The Asia/Pacific region recorded a decrease in sales of 30 percent in local currencies to 8 million euros (8.7 million dollars).

Sales in the license business increased by 5percent to 17 million euros (18 million dollars). The sales development of the Boss core brand was related to scaling back distribution in the American wholesale business. The athleisure offering, which in 2017 is still sold under the Boss Green brand, continued to post double-digit growth. Hugo recorded an increase in sales since the brand benefited from a growing wholesale presence as well as growth in the group’s own retail business. The increase in sales in the menswear business, the company said, was bolstered by growth of Hugo and Boss Green. The womenswear business also benefited from positive sales development in the Hugo brand.

In Europe, the positive sales development as well as a slight decline in operating expenses led to an increase in segment earnings. The adjusted EBITDA margin rose by 150 basis points to 30.8percent. In the Americas, the decline in sales in the United States, negative inventory valuation effects and higher sales and marketing expenses all contributed to a significant fall in earnings. At 12.3 percent, the adjusted EBITDA margin was 810 basis points below the prior-year figure. Segment earnings in the Asia/Pacific region benefited from positive sales growth as well as significantly lower discount levels. At 25.3 percent, the adjusted EBITDA margin was up 690 basis points on the prior year.

In the first quarter, the number of the group’s own freestanding retail stores declined by a net figure of six to 436. As at March 31, 2017, five of the around 20 store closures agreed upon in the fiscal year 2016 were completed. In Europe, two new stores were opened in Moscow and Newcastle. At the same time, six freestanding retail stores were closed. In the Americas region, the number of freestanding retail stores decreased as a result of two closures in the United States. The size of the store network in the Asia/Pacific region, however, remained unchanged. Three new store openings in Korea cancelled out the same number of store closures.

Picture:Hugo Boss website

Hugo Boss