[FRANKFURT] Hugo Boss’ plan to return to profit growth this year faces an initial hurdle as weak consumer sentiment in the US and China weigh on sales and profit in the current quarter.
“We expect a muted first-quarter performance trending somewhat below our full-year top line guidance range,” chief executive officer Daniel Grieder told journalists on a call.
The shares fell 5.3 per cent by 1.17 pm Frankfurt time in an up-and-down session that earlier saw them rise as much as 4.7 per cent. The stock has dropped about 35 per cent in the last 12 months, a worse performance than rival high-end apparel makers Burberry Group and Ralph Lauren.
The German fashion house has been suffering since last year from a decline in consumer spending, which Grieder is trying to address with efficiency measures, such as shifting transport from air freight to ships. Job cuts are “not in our intention as we speak”, he said on the call.
In his nearly four-year tenure, Grieder revamped the Hugo and Boss brands with the goal of luring younger shoppers with more casual wear. His goals initially set out for 2025 – sales of five billion euros (S$7.3 billion) and a profit margin of at least 12 per cent – were delayed last year. But they are still doable, he said on Thursday (Mar 13), without giving a specific time frame for reaching them.
The company expects earnings before interest and taxes of between 380 million euros and 440 million euros this year, it said, in line with analysts’ forecasts. The outlook for 2025 sales, however, came in just below the average estimate of analysts surveyed by Bloomberg.
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“The road ahead comes with several challenges that all pose tangible risk to consumer sentiment in 2025,” Grieder said, citing tariffs and the weak economic situation in China.
While the effect of tariffs imposed by the US administration is still unclear, Hugo Boss’s supply chain is flexible and sourcing from China has been reduced to below 5 per cent, chief financial officer Yves Müller said. The company does not plan price increases at the moment, “but we have to see how it develops in the next few weeks and months”, Grieder said.
Asked about Frasers Group, now the company’s largest shareholder, Grieder said the exchanges have been “very constructive”. The acquisitive sportswear-to-department-store retailer’s CEO, Michael Murray, is seeking a seat on Hugo Boss’s supervisory board at the May 15 annual meeting.
The risk of a criminal investigation into Grieder over media allegations of insider trading activities is over, with the German financial watchdog and a public prosecutor deciding after an initial examination that there was no sufficient evidence to launch such a procedure.
“This affair is behind us, it’s dealt with in a serious, transparent way,” Grieder said.
Hugo Boss intends to pay a dividend of 1.40 euros per share, above analysts estimate. BLOOMBERG
