HUGO BOSS returns to profit in Q3 as gradual business recovery continues
- Group sales decline limited to minus 24% (currency-adjusted)
- Online business continues double-digit growth trajectory – sales up 66%
- Momentum in mainland China accelerates with revenues up 27%
- EBIT returns to positive territory with plus EUR 15 million
- Strong free cash flow generation of EUR 155 million
“We made further progress in the recovery of our business, with great contribution coming from Online and mainland China. Our profitability returned to positive territory, and we even accelerated our strong cash flow generation,” says Yves Müller, Spokesperson of the Managing Board of HUGO BOSS AG. “Further driving the global recovery of our business will remain a key priority for us as we approach year-end. At the same time, we will continue to push ahead with the execution of our strategic initiatives to return to our former growth trajectory.”
In the third quarter, HUGO BOSS successfully continued its gradual business recovery. With the vast majority of its own stores back in operation, particularly the Group’s own retail business recorded a considerably more robust performance as compared to the first half of the year, with own retail revenues down by 20%, currency-adjusted. While local demand in key markets picked up noticeably as compared to the previous quarter, business with tourists continued to suffer from international travel restrictions. Overall, Group sales amounted to EUR 533 million in the third quarter, representing a currency-adjusted decline of 24% against the prior-year period (Q3 2019: EUR 720 million). In reporting currency, this corresponds to a decrease of 26%.
Online business continues its double-digit growth trajectory
The Group’s own online business was able to maintain its strong momentum, with currency-adjusted sales up 66% in the third quarter. Supported by the accelerated consumer demand shift towards digital, sales on hugoboss.com and the Group’s self-managed offerings on key partner websites recorded strong improvements in both traffic and conversion rates. The successful expansion of hugoboss.com to 24 additional markets in June and August also contributed to the increase. Thereby, the period from July to September marks the twelfth consecutive quarter with significant double-digit online sales growth for HUGO BOSS.
Momentum in mainland China further accelerates
While all three regions recorded a business recovery in the third quarter, the pace of recovery was most pronounced in Asia/Pacific, with currency-adjusted sales down 14%. Mainland China, a strategically important market for HUGO BOSS, stood out positively again. With revenues up 27% currency-adjusted, mainland China gained further momentum in the three-month period, thus successfully continuing its recovery that already started back in March. While this development is also supported by a repatriation of local demand, HUGO BOSS once again witnessed a strong improvement in conversion rates in brick-and-mortar retail as well as high double-digit online sales growth.
In Europe, currency-adjusted sales declined by 21% against the prior-year period. While the region saw a solid rebound of local demand in key markets such as the UK and France, the restraint in tourism continued to weigh on its overall business recovery. In the Americas, currency-adjusted sales were down 41%, as the negative implications of the pandemic continued to weigh on the Company’s U.S. business, both in own retail and wholesale.
Profitability returns to positive territory in the third quarter
Despite the overall sales decline, the Group’s operating profit (EBIT) returned to positive territory in the third quarter. This development was driven by tight cost control and the successful execution of the Company’s expense-reduction measures. Consequently, HUGO BOSS generated a positive EBIT of EUR 15 million in the three-month period (Q3 2019: EUR 83 million).
Safeguarding the financial stability of HUGO BOSS continued to be a key priority in the past months. In this context, the Company made further progress in successfully executing its various measures regarding cash flow protection. As a result, the Group generated a strong free cash flow of EUR 155 million in the three-month period (Q3 2019: EUR 63 million). At the same time, the financial flexibility of HUGO BOSS remains sound. The Company’s revolving syndicated loan, which totals EUR 633 million, was only utilized in the amount of EUR 134 million at the end of September. Additionally, the Group has not drawn on the additional credit commitments totaling EUR 275 million that it secured in the second quarter.
Further business recovery remains key priority
Based on its overall position of financial strength, HUGO BOSS will continue to focus on driving the further recovery of its business going forward. In this context, the Group will resolutely exploit its global sales opportunities during the important final quarter of the 2020 fiscal year, in particular with regard to its strategic growth drivers Online and China. At the same time, HUGO BOSS expects continuing uncertainty with regard to the further development of the pandemic. Many key markets are currently witnessing a surge in the number of COVID-19 infections, which in turn weighs on consumer behavior. Besides that, further countermeasures taken by governments to contain the spread of the virus are yet to be seen.
Driving brand heat through numerous product and marketing initiatives
Beyond the further recovery of the Group’s overall business, elevating the desirability of its brands will continue to be a focal point for HUGO BOSS. To create awareness and strengthen the profile of BOSS and HUGO among younger target groups, future brand and marketing initiatives will be centered on emotional events as well as exclusive collaborations with brands and ambassadors. Social media will take center stage, with all communication initiatives build around it.
In September, BOSS revealed its Spring/Summer 2021 Menswear and Womenswear collections with a live runway show at Milan Fashion Week, livestreamed on hugoboss.com, Instagram, and for the first time on TikTok. The show continued the decisive move towards casualization, revealing a sportier and younger version of the BOSS man and woman than ever before. A brand experience event took place simultaneously in Shanghai across Chinese digital platforms WeChat and T-Mall. The event concluded with the reveal of an exclusive collection of the upcoming holiday campaign BOSS x Justin Teodoro, which was offered to Chinese customers during an exclusive 48 hours “see now buy now” shopping experience.
Earlier in September, BOSS announced the partnership with German fashion influencer and entrepreneur Caro Daur on an exciting womenswear capsule. Staying true to the brand’s elegant aesthetic while fusing both parties’ individual approaches to style, the “BOSS curated by Caro Daur” styles are currently available in BOSS stores globally and online at hugoboss.com. The month of September also saw the launch of an exclusive BOSS menswear capsule co-created by British boxer Anthony Joshua. In a palette of navy and gold, the casual collection brings together Joshua’s unstoppable spirit with elegant BOSS style. For both collections, the Group has seen an affirmative response with regards to sales with many pieces sold-out on hugoboss.com shortly after their launch.
Another exciting collaboration will come to life during the upcoming Pre-Fall 2021 season, when BOSS will team up with the iconic American brand Russell Athletic. This unexpected capsule collection will range from apparel to shoes and accessories, with a clear focus on casualwear and athleisure wear, and become available from March 2021 onwards. The looks unite the best of both worlds – the expert tailoring and signature style of BOSS Menswear with the instantly recognizable aesthetic of the American sportswear pioneer – and will enable BOSS to further strengthen its positioning within casualwear.
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