Hugo Boss sees sales re­bound gath­er­ing pace as US strength­ens

The Pak Banker - - Company+Boss News -

DUS­SEL­DORF: Hugo Boss AG's sales re­bound will gather pace in the sec­ond half of 2010 as its U.S. busi­ness ben­e­fits from a shift by cus­tomers to­ward less-ex­pen­sive lux­ury items, ac­cord­ing to Chief Fi­nan­cial Of­fi­cer Mark Langer.

Rev­enue growth in the pe­riod will come close to the Ger­man cloth­ing maker's 8 per­cent long-term fore­cast through 2015, Langer said in an in­ter­view at the com­pany's Met­zin­gen head­quar­ters. Sales rose 6.9 per­cent in the sec­ond quar­ter, af­ter fall­ing 8.2 per­cent in the year's first three months.

"We don't see any or­der re­luc­tance at our re­tail part­ners in the U.S. and our own stores are also show­ing growth," Langer said, adding that Boss is gain­ing mar­ket share in the coun­try.

Price-con­scious U.S. con­sumers are turn­ing to Hugo Boss men's suits, which from as lit­tle as $695 are at the lower end of the lux­ury spec­trum, ac­cord­ing to Langer. The cloth­ier gets 17 per­cent of rev­enue from the coun­try, where store sales missed an­a­lysts' es­ti­mates last month as con­sumers re­stricted spend­ing. Com­peti­tor J. Crew Group Inc. cut its profit fore­cast last week.

Boss's whole­sale di­vi­sion, which ac­counts for about 60 per­cent of the cloth­ier's rev­enue, has suf­fi­cient or­ders from re­tail­ers for the next six months, Langer said.

"Stores made good busi­ness with this year's sum­mer col­lec­tion, en­cour­ag­ing them to or­der our 2011 col­lec­tion," Langer said. Women's wear is sell­ing "very well," he said.

Hugo Boss, con­trolled by buy­out firm Per­mira Ad­vis­ers LLP, started an on­line busi­ness in the U.S. this year to ex­pand its re­tail­ing unit. The com­pany, which also sells on­line in the U.K., Ger­many, France and the Nether­lands, ex­pects sales of more than 10 mil­lion eu­ros ($12.7 mil­lion) this year through the in­ter­net and wants to in­crease that fig­ure to as much as 60 mil­lion eu­ros by 2013, Langer said.

Sales growth is also set to ac­cel­er­ate in China, where Hugo Boss started a joint ven­ture with lo­cal fashion re­tailer Rain­bow Group last month, the ex­ec­u­tive said. Sales in the world's most pop­u­lous coun­try rose 54 per­cent to 40 mil­lion eu­ros in the first six months of the year. Boss plans to open as many as 20 stores in China dur­ing the re­main­der of 2010, com­pared with a world­wide to­tal of 50 ad­di­tional out­lets for the year.

The Chi­nese joint ven­ture and store open­ings re­duced the pro­por­tion of whole­sale rev­enue from 70 per­cent and brought the com­pany closer to its tar­get of less than 50 per­cent.

Sales in some Euro­pean coun­tries in­clud­ing Spain and Italy will re­main slug­gish, while or­ders from Rus­sian re­tail­ers in Moscow and St Peters­burg have started ris­ing again, Langer said.

The ex­ec­u­tive re­peated a fore­cast for rev­enue growth of as much as 5 per­cent on a cur­rency-neu­tral ba­sis this year. Earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion are pro­jected to rise as much as 12 per­cent this year. Hugo Boss pre­ferred shares have risen 37 per­cent this year in Frank­furt, beat­ing a 7 per­cent in­crease in Ger­many's MDAX in­dex of medium-sized com­pa­nies. -Bloomberg

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