HUGO BOSS increases sales and operating profit in the second quarter
Source Textile Reads10-08-19
HUGO BOSS increases sales and operating profit in the second quarter
- Currency-adjusted Group sales grow 2% in the second quarter
- Momentum in China accelerates: double-digit comp store sales increases
- Online business continues to grow at a double-digit rate
- Significant increase in efficiency: operating profit (EBIT) up 3%* in Q2
- Management expects full-year sales and earnings at the lower end of the existing outlook
“In an ongoing challenging market environment, we have increased both our sales and operating profit in the second quarter,” says Mark Langer, Chief Executive Officer of HUGO BOSS AG. “For the second half of the year, we are now expecting a significant acceleration in sales and operating profit development. This will make a decisive contribution to the achievement of our full-year targets. Key drivers will be our partnerships in the online business and the ongoing optimization of our store network.”
In the second quarter, HUGO BOSS increased currency-adjusted sales by 2% to EUR 675 million. This represents an increase of 3% in the reporting currency. Sales performance in Asia/Pacific was once again particularly strong. Currency-adjusted sales growth accelerated there to 8%. In China, HUGO BOSS achieved double-digit comp store sales growth. In Europe, sales increases in Great Britain and France offset a decline in Germany. Overall, currency-adjusted sales in Europe were up 2%. Due to the persistently difficult market environment in the U.S., sales in the Americas were down 3% on the prior year. In particular, an easing of the positive effects of the tax reform, a weaker business with tourists and a highly promotional market environment in general weighed on sales performance.
Group-wide retail sales in the second quarter increased 3% in total and 2% on a comp store basis, both adjusted for currency effects. The online business increased by 16% adjusted for currency effects, representing the seventh consecutive quarter of double-digit growth. Due to a highly disciplined markdown management, growth was, as expected, lower than in the prior quarters. The wholesale business developed stable, with sales in Europe and Asia/Pacific above the prior year level.
Operating profit (EBIT) increased by 3% in the second quarter to EUR 76 million. In addition to higher sales, the increase in operating profit was also supported by consistent cost management. This allowed HUGO BOSS to compensate for a decline in the gross profit margin in the second quarter. In total, HUGO BOSS recorded currency-adjusted sales growth of 1% in the first half of 2019. In the reporting currency, this is equivalent to a 3% sales increase to EUR 1,339 million. At EUR 130 million, EBIT was 9% below the prior year level.* The increase in operating profit in the second quarter partially offset the decline in the first quarter, which was mainly related to one-off effects.
Lower end of existing sales and earnings outlook expected
On the basis of the half-year results, HUGO BOSS confirms its outlook for the full year 2019. At the same time, management now expects sales and earnings to reach the lower end of the existing outlook. In doing so, HUGO BOSS takes into account the persisting challenges in the US market in particular. The Company expects that currency-adjusted sales growth will reach the lower end of the existing outlook (increase at a mid-single-digit percentage rate). The acceleration in sales in the second half of the year will be driven by the own retail business, which is forecast to achieve currency-adjusted sales growth in the mid to high single-digit percentage range in full year 2019. In addition to an acceleration in comp store sales growth, the Company expects further growth stimuli for the second half of the year from intensified online partnerships under the concession model and from the ongoing optimization of its store network.
For the second half of the year, the Company also anticipates a significant acceleration in operating profit development. HUGO BOSS expects to achieve EBIT growth at the lower end of the existing outlook (increase at a high single-digit percentage rate) for the full year (excluding the expected effects of IFRS 16). In addition to a significant increase in gross profit expected for the second half of the year, the anticipated further improvement in cost efficiency should also contribute positively to operating profit development.
Execution of strategic priorities in full swing
In the second quarter, the Company has continued to make good progress in executing its strategic priorities. With the introduction of “BOSS Made for Me,” the Company has further expanded its personalized product offering. Customers can use this service to freely combine outer materials, lining and buttons on their new BOSS suit, thereby tailoring it individually to their preferences. The face of the accompanying campaign is the professional soccer player Mats Hummels. “BOSS Made for Me” is already offered in selected BOSS stores in Europe, including London, Paris and Munich. This service will be successively expanded in the coming months.
The renovation of strategically important BOSS stores is also progressing according to plan. In the second quarter, eight stores were reopened under the new store concept, including stores in Stockholm, Tokyo and Macau. Customers now have the opportunity to experience the BOSS collections in this new environment in more than 40 major cities. For the HUGO brand, three additional stores with a unique furniture concept opened in the same period in Tokyo, Singapore and Moscow. Today there are 26 HUGO stores globally presenting the brand to customers.
Liam Payne and Mark Chao established as brand ambassadors
At the Berlin Fashion Week in early July, HUGO presented a jointly developed capsule collection together with the British singer and artist Liam Payne. The new styles were showcased digitally at an event in Berlin with a live appearance from Liam Payne, after which they were immediately made available online – exclusively on Instagram initially, then via hugo.com and in selected HUGO stores. As the global brand ambassador for HUGO, Liam Payne will continue to support important marketing campaigns and exclusive collections in the coming months. This is the first partnership of its kind for HUGO. Liam Payne is expected to raise the brand’s profile globally and play a key role in further increasing HUGO’s relevance in the dynamic contemporary fashion segment.
In addition, the partnership recently entered into with the Taiwanese-Canadian actor Mark Chao is intended to further increase desirability of the BOSS brand in Asia. In an initial step, a jointly developed capsule collection was launched on the Chinese market in April under the title “Luxury Travel.” The response to the styles available in selected BOSS stores, via boss.com and a WeChat Mini Program was extremely positive. In his role as regional brand ambassador, Mark Chao will continue as the face of important marketing campaigns.