In the third quarter, Hugo Boss said its currency-adjusted sales increased by 1 percent to 710 million euros (810 million dollars). The company added that extraordinary long and hot summer along with the ensuing late start into the fall/winter season put a strain on business, particularly in Germany and France. In the third quarter, gross profit margin declined by 240 basis points. As a result, the company said, EBITDA before special items was down 12 percent compared to the prior year’s level, amounting to 126 million euros (143.7 million dollars) with negative currency effects of 5 million euros contributing to this decline.
“A challenging market environment meant that the third quarter was not easy. In particular the long, hot summer in Europe affected our business,” said Mark Langer, Chief Executive Officer of Hugo Boss AG in a statement, adding, “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.”
Review of Hugo Boss results
The Group’s own retail business in the third quarter increased by 3 percent on a comp store and currency-adjusted basis and at 38 percent, sales in the company-owned online business showed a double-digit increase. However, sales in the wholesale channel decreased due to delivery shifts compared to the prior year.
In total, Hugo Boss recorded currency-adjusted sales growth of 4 percent in the first nine months of fiscal year 2018 driven by sales increase in the Group’s own retail business, with comp store sales up 5 percent. At 331 million euros (377.6 million dollars), EBITDA before special items was 5 percent below the prior year level.
The company further said that despite the challenging market environment in the third quarter, Hugo Boss confirms its sales and earnings guidance for full-year 2018. The company continues to expect an increase in Group sales in the low- to mid-single digit percentage range. EBITDA before special items is expected to develop within a range of negative 2 percent and positive 2 percent compared to the prior year. The company is anticipating a significant improvement in sales and earnings for the fourth quarter and expects robust growth in its own retail business, with the fourth quarter traditionally being the strongest in terms of sales.
Hugo Boss performance across geographies
In the third quarter, Hugo Boss said, sales developed differently by region. While the Americas and Asia/Pacific registered robust growth, Europe was negatively impacted by the challenging market environment. In Europe, single-digit sales growth in the Group’s own retail business could not compensate for a mid single-digit decline in the wholesale business. The latter was negatively impacted by delivery shifts compared to the prior year. Great Britain was once again the strongest retail market, with currency-adjusted sales growth of 11 percent.
Sales in the Benelux countries remained stable. In Germany and France, sales decreased by 13 percent and 8 percent, respectively. The extraordinary long and hot summer in particular along with the ensuing late start into the fall/winter season put a strain on business. In the Americas, all markets contributed to sales growth. Double-digit growth in the wholesale business as well as stable development in the Group’s own retail business provided overall sales growth of 5 percent in the US. In Canada and Latin America, the group registered low single-digit and low double-digit growth, respectively.
In the Asia/Pacific region, the company said, growth remained strong in the third quarter. With comparable double-digit growth rates, business development in mainland China in particular continued to be highly positive. Sales grew in Hong Kong and Macau as well. Overall sales in China grew by 7 percent, while Japan achieved high single-digit sales growth.
Sales in the Group’s own retail business (including outlets and online stores) showed currency-adjusted growth of 2 percent. Sales grew by 3 percent on a comp store and currency-adjusted basis, with online business performing better than brick-and-mortar retail. Asia/Pacific achieved high single-digit growth. In Europe and the Americas, currency-adjusted comp store sales grew in the low single-digit range. Overall, sales in the Group’s own retail business in Europe were up 2 percent on a currency-adjusted basis and reached 246 million euros (280.7 million dollars). Sales in the Americas amounted to 92 million euros (105 million dollars), 2 percent currency-adjusted increase. In Asia/Pacific, sales grew by 5 percent in local currencies to 77 million euros (87.8 million dollars).
At 216 million euros (246.5 million dollars), wholesale sales in Europe were 6 percent lower than in the prior year, while the Americas saw a 13 percent currency-adjusted increase in sales to 50 million euros (57 million dollars). Currency-adjusted wholesale sales in the Asia/Pacific region grew by 34 percent to 9 million euros (10.2 million dollars). Sales in the company’s license business declined by 2 percent to 19 million euros (21.6 million dollars).
Hugo brand sales continue to witness a decline
Hugo brand sales declined, with double-digit growth in casualwear only partially compensating for declines in businesswear. Boss sales development profited from growth in businesswear and casualwear, while sales in athleisurewear decreased slightly.
Sales development in menswear, Hugo Boss said, benefited from high single-digit growth in casualwear and low single-digit increases in businesswear. Womenswear recorded a sales decrease, which is attributable to the Boss brand and linked to the reduction of retail space in freestanding stores, which could not be offset by growth in the Hugo brand.