- Own retail business continues to grow at double-digit rates
- Group sales decline by 2% as a result of a different timing of wholesale deliveries compared to the prior year
- Increased gross profit margin partly compensates for lower sales and higher operating expenses
- Positive outlook for 2013 reconfirmed
Metzingen, May 2, 2013. The persistently challenging economic environment and a different timing of product deliveries to wholesale partners had an adverse impact on the HUGO BOSS Group’s sales and earnings performance in the first quarter. Nevertheless, the Company reaffirms its growth forecast for the year as a whole.
“The market environment proved to be very challenging in the early months of this year”, says Claus-Dietrich Lahrs, Chief Executive Officer of HUGO BOSS AG. “With a better performance of the wholesale business in the further course of this year, we shall return to renewed growth in the second quarter already. We therefore reconfirm our sales and profit targets for 2013.”
Continued double-digit growth in own retail
In the first quarter of 2013, the HUGO BOSS Group achieved sales of EUR 593 million. This corresponds to a decline of 2% both in euro and in local currencies compared with the previous year (Q1 2012: EUR 607 million). The different timing of product deliveries compared to the prior year following the introduction of the more season focused collection cycle and the resulting increasing importance of the Summer collection, which is mainly delivered in the second quarter, had a material impact on the negative development in the wholesale business. Overall, sales generated in the wholesale business in the first quarter were down 14% compared to the previous year after adjustment for currency effects. The Group’s own retail business (including outlets and online business) posted a sales increase of 15% in local currencies. The growth in retail comp store sales amounted to 2% after adjustment for currency effects. The Group’s own retail network was expanded by 36 in net terms to 876 locations in the first quarter of 2013 (December 31, 2012: 840).
From a regional perspective, growth was mixed in the first quarter. Sales in Europe, where wholesale remains the most important distribution channel, were down 5% compared to the previous year. In the Americas, sales in local currencies increased by 6% supported by a continued positive performance in the U.S. Slight growth in China led to a 1% increase in sales in Asia after adjustment for currency effects.
The gross profit margin improved by 80 basis points to 61.8%, which was attributable primarily to the expansion of the Group’s own retail business and the positive development in the royalty business (Q1 2012: 61.0%). Higher operating expenses, caused in particular by the continued expansion of the Group’s own retail business, led to a decrease in EBITDA before special items of 11% to EUR 133 million (Q1 2012: EUR 148 million). The adjusted EBITDA margin declined by 220 basis points in the first quarter to 22.3% (Q1 2012: 24.5%).
Inventory decline supports reduction in trade net working capital
The Group’s key balance sheet metrics improved further. Trade net working capital decreased by 5% to EUR 454 million (March 31, 2012: EUR 476 million). The reduction in inventories of 5% to EUR 400 million (March 31, 2012: EUR 422 million) played an important role in this development. In the first quarter of 2013, investment was well up on the level of the previous year, at EUR 31 million (Q1 2012: EUR 15 million). The increase was mainly driven by investments in the new flat-packed goods distribution center and in the Group’s own retail business. Net financial liabilities fell by 12% to EUR 124 million (March 31, 2012: EUR 141 million) thanks to strict capital management.
Outlook for 2013 reconfirmed
HUGO BOSS continues to expect high single-digit currency-adjusted sales growth in 2013. All regions are projected to contribute to the increase. The Group anticipates continued double-digit growth in its own retail business, while the wholesale channel is expected to record an approximately stable development. The Group plans to expand its network with around 50 new stores excluding takeovers. Capital expenditure in 2013 will increase compared to the prior year on a comparable basis, excluding expenditures for the current construction of the new flat-packed goods distribution center, and will focus primarily on the planned expansion and renovation of the Group’s own store network. Like sales, EBITDA before special items is expected to rise at a high single-digit rate.
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