Long, Hot Sum­mer Wilts Hugo Boss Q3 Prof­its

WWD Digital Daily - - Wwd - BY MELISSA DRIER

BER­LIN — Europe’s long, hot sum­mer and a chal­leng­ing mar­ket en­vi­ron­ment neg­a­tively im­pacted third-quar­ter earn­ings per­for­mance at Hugo Boss. The Ger­man ap­parel group posted an 18 per­cent drop in net in­come and a 12 per­cent de­cline in earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion be­fore spe­cial items, while sales were flat for the pe­riod end­ing Sept. 30.

Nonethe­less, an­tic­i­pat­ing “sig­nif­i­cant growth in sales and earn­ings in the fourth quar­ter,” Boss con­firmed its full-year sales and earn­ings guid­ance. Re­gard­ing gross profit mar­gin, which de­clined 240 ba­sis points in the third quar­ter, Boss is now fore­cast­ing a de­cline of be­tween 50 and 100 ba­sis points for the full year.

Third-quar­ter net in­come slipped to 66 mil­lion eu­ros com­pared to 80 mil­lion eu­ros the pre­vi­ous year, with EBITDA be­fore spe­cial items reach­ing 126 mil­lion eu­ros, down from 143 mil­lion eu­ros for the prior-year pe­riod. While op­er­at­ing ex­penses were down slightly, this could only par­tially off­set the EBITDA de­cline.

The gross profit mar­gin was down to

62.5 per­cent com­pared to 64.9 per­cent the year pre­vi­ously, which Boss at­trib­uted to neg­a­tive ef­fects from in­ven­tory val­u­a­tion, higher mark­downs in own re­tail, con­tin­ued in­vest­ments in prod­uct qual­ity and neg­a­tive cur­rency ef­fects. Cur­rency ef­fects had an over­all neg­a­tive ef­fect on earn­ings de­vel­op­ment in the quar­ter, the group noted.

Group sales for the pe­riod were flat at 710 mil­lion eu­ros, rep­re­sent­ing a 1 per­cent in­crease in cur­rency-ad­justed terms. Sales in Europe dropped 3 per­cent to 462 mil­lion eu­ros, while the Amer­i­cas gen­er­ated a 5 per­cent gain to 142 mil­lion eu­ros and sales in Asia-Pa­cific rose 6 per­cent to 87 mil­lion eu­ros. Li­cense rev­enues were down 2 per­cent to 19 mil­lion eu­ros.

By chan­nel, the group’s own re­tail busi­ness was up 1 per­cent to 415 mil­lion eu­ros, with sales up 3 per­cent on a comp store and cur­rency-ad­justed ba­sis. While Boss did not break out num­bers, the com­pany said its on­line busi­ness surged 38 per­cent in the quar­ter. De­liv­ery shifts had a some­what neg­a­tive ef­fect on whole­sale sales, which de­clined 2 per­cent dur­ing the pe­riod.

Re­flect­ing on­go­ing dis­tri­bu­tion shifts, which in­volved a trans­fer of sell­ing space from Hugo to Boss for cer­tain prod­uct cat­e­gories in whole­sale and own re­tail, as well as a re­duced pres­ence of Hugo in the out­let chan­nel, sales of the younger Hugo brand were down 11 per­cent to 98 mil­lion eu­ros for the quar­ter “as ex­pected.” Boss brand sales were up 2 per­cent, reach­ing

612 mil­lion eu­ros. By gen­der, the group’s women’s wear sales were down 8 per­cent to 70 mil­lion, which the com­pany pri­mar­ily linked to re­duced re­tail space of Boss brand women’s wear in its own re­tail busi­ness.

The third quar­ter also saw sev­eral mile­stones in the ful­fill­ment of the group’s strate­gic ini­tia­tives. To strengthen dig­i­tal sales, Boss stepped up its part­ner­ship with e-tail gi­ant Za­lando in early Oc­to­ber via the Za­lando Part­ner Pro­gram. Un­der the part­ner­ship, Boss in­de­pen­dently man­ages the pre­sen­ta­tion and sales of Boss Busi­ness­wear, which is now avail­able on Za­lando for the first time.

Also of strate­gic note: the joint Boss men’s and women’s spring 2019 fash­ion show in New York, which was boosted by a si­mul­ta­ne­ous in­ter­ac­tive so­cial me­dia cam­paign. In ad­di­tion, the fur­ther roll-out of Hugo stores in key Eu­ro­pean cities saw open­ings in Lon­don and Paris in the Ju­lySeptem­ber pe­riod.

Boss is look­ing for­ward to a solid endof-year per­for­mance. Ac­cord­ing to chief ex­ec­u­tive of­fi­cer Mark Langer, “We’re ex­pect­ing a strong ac­cel­er­a­tion in sales and earn­ings in the fourth quar­ter. We are there­fore very con­fi­dent that we will achieve our full-year tar­gets.” These call for a sales in­crease at a low- to mids­in­gledigit per­cent­age rate, and EBITDA be­fore spe­cial items to de­velop within a range of mi­nus 2 per­cent to plus 2 per­cent over the prior year.

“We’re con­sis­tently pur­su­ing our strate­gic ini­tia­tives and I’m con­vinced that we will re­turn to sus­tain­able prof­itable growth in the com­ing year,” Langer said.

Boss will present its mid-term fi­nan­cial out­look as well as re­leas­ing fur­ther in­for­ma­tion on the progress of the group’s strate­gic ini­tia­tives as part of an in­vestor day in Lon­don on Nov. 15.

An­tic­i­pat­ing a strong fourthquar­ter per­for­mance, Boss con­firms its full-year sales and earn­ings guid­ance.

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