Quarterly Statement for Q3 2019
Metzingen, November 5, 2019
HUGO BOSS expects sales and earnings growth in the fourth quarter – ongoing focus on strategic initiatives
- Currency-adjusted Group sales remain stable in the third quarter
- Sales growth in online business accelerates to 36% in Q3
- Challenging market environment in North America and Hong Kong weighs on earnings development in the third quarter
- Significant increase in earnings expected in the fourth quarter
"The challenging market environment demonstrates the importance of focusing on the execution of our strategic priorities," says Mark Langer, Chief Executive Officer of HUGO BOSS AG. "Especially in our own online business and in the important growth market China, we are already seeing the successes today. We are also working to significantly improve our profitability in structural terms. In the important final quarter, we intend to significantly increase our operating profit again."
As already announced in October, the persistent macroeconomic uncertainties weighed on the sales development of HUGO BOSS in the third quarter. Consequently, currency-adjusted Group sales remained at the prior year level. This represents an increase of 1% to EUR 720 million in the reporting currency. In particular, in North America, the market environment further deteriorated. Besides lower local demand, also sales generated with tourists decreased in this market. Overall, currency-adjusted sales in the Americas were 8% below the prior year level. In Asia/Pacific, currency-adjusted sales rose 2%. While in Mainland China, HUGO BOSS once again recorded double-digit growth on a comp store and currency-adjusted basis, business in Hong Kong is substantially negatively affected since the beginning of the political unrest and demonstrations. In Europe, currency-adjusted sales also rose 2%, with significant differences in the individual markets. While sales in Great Britain continued to develop positively, sales in Germany were below the prior year level.
In the third quarter, the own retail business recorded currency-adjusted sales growth of 3%. Currency-adjusted comp store sales increased 2%. While growth in the own online business accelerated to 36%, wholesale sales were below the prior year level.
Operating profit (EBIT) decreased 13% to EUR 80 million in the third quarter (excluding the effects of IFRS 16), and thus fell short of expectations. Besides lower than anticipated sales growth, higher operating expenses also contributed to this.
In total, HUGO BOSS achieved currency-adjusted sales growth of 1% in the first nine months of 2019. This corresponds to an increase of 2% to EUR 2,059 million in the reporting currency. At EUR 211 million, EBIT was 10% below the prior year level (excluding the effects of IFRS 16).
Full year 2019 outlook adjusted in October – sales and earnings growth expected in Q4
Against the background of the persistently difficult market environment, HUGO BOSS has already adjusted its financial outlook for the current year in October. Management assumes that currency-adjusted Group sales for full year 2019 will increase at a low single-digit percentage rate. In addition, the Group expects to generate an EBIT of between EUR 330 million and EUR 340 million for the full year (excluding the effects of IFRS 16; prior year: EUR 347 million).
In addition to sales growth, HUGO BOSS consequently also expects a significant increase in operating profit for the fourth quarter. In particular, the own retail business should contribute to this. In this regard, for the final quarter, management expects above all positive effects from the intensification of online partnerships in the concession model and from the ongoing modernization of the store network.
Focus on the successful implementation of strategic initiatives
Despite the heightened macroeconomic uncertainties that the Group is currently facing, HUGO BOSS continues to make significant progress in executing against its strategic initiatives. One focus is on the continuous optimization of the global retail store network. Since the beginning of October, also the world's largest BOSS flagship store on the Champs-Élysées in Paris has been presenting the latest store concept. At around 1,200 m², customers can now experience the complete BOSS Menswear and Womenswear collections in a new ambience. The seamless integration of modern architectural elements and various digital services significantly enhances the shopping experience. The wide product range is rounded off with the personalized offers "BOSS Made to Measure" and "BOSS Made for Me".
In addition, HUGO BOSS opened its new outlet at the Group’s headquarters in Metzingen, Germany, in September. Menswear, womenswear as well as shoes and accessories from the BOSS and HUGO brands are offered in the company's largest outlet globally. The well thought-out building structure is characterized by clearly organized brand spaces and guarantees the quick and efficient supply of goods.
In the last few weeks, BOSS also received international attention with two fashion shows in Milan and Shanghai. At the end of September, BOSS Menswear and BOSS Womenswear presented their Spring/Summer 2020 collection in a combined show in the fashion metropolis of Milan. In October, BOSS was again represented at a fashion show in Shanghai for the first time since 2013, thus underlining the importance of China as a strategic growth market for the company. Overall, the response to both fashion shows and the accompanying social media campaigns was extremely positive – thanks also to the close involvement of international bloggers and influencers.