- Currency-adjusted sales up 1% in the third quarter
- Retail comp store sales increase 3%
- Online business continues to grow at a strong double-digit rate
- Challenging market environment leads to decline in gross profit margin
- EBITDA before special items 12% below prior year level
- Significant growth in sales and earnings expected in the fourth quarter
- Close collaboration with Zalando agreed
“A challenging market environment meant that the third quarter was not easy. In particular the long, hot summer in Europe affected our business,” says Mark Langer, Chief Executive Officer of HUGO BOSS AG. “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. Accordingly, we're consistently pursuing our strategic initiatives and I’m convinced that we will return to sustainable profitable growth in the coming year.”
In the third quarter, HUGO BOSS increased currency-adjusted sales by 1% to EUR 710 million. Robust growth in the Americas and Asia offset a slight decrease in Europe. The 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. The Group’s own retail business in the third quarter increased by 3% on a comp store and currency-adjusted basis. At 38%, sales in the own online business again showed a strong double-digit increase. However, sales in the wholesale channel decreased slightly, as expected. This development was due to delivery shifts compared to the prior year.
In the third quarter, gross profit margin declined by 240 basis points. This development was mainly due to higher markdowns, reflecting the challenging market environment. As a result, EBITDA before special items was down 12% compared to the prior year’s level, amounting to EUR 126 million. Negative currency effects of EUR 5 million also contributed to this decline.
In total, HUGO BOSS recorded currency-adjusted sales growth of 4% in the first nine months of fiscal year 2018. A significant driver was the sales increase in the Group’s own retail business, with comp store sales up 5%. At EUR 331 million, EBITDA before special items was 5% below the prior year level.
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 –2% and +2% compared to the prior year. HUGO BOSS is anticipating a significant improvement in sales and earnings for the fourth quarter. The company expects robust growth in its own retail business, with the fourth quarter traditionally being the strongest in terms of sales. This assumption is supported by the positive retail business development in October. Furthermore, an improved development of gross profit margin compared to the performance in the first nine months as well as the consistent strong focus on cost management will ensure significant profit growth in the fourth quarter.
HUGO BOSS also looks back at several important milestones in the implementation of its strategic initiatives in the third quarter. BOSS Menswear and BOSS Womenswear presented their new Spring/Summer 2019 collections entitled “California Breeze” at the New York Fashion Show. An interactive social media campaign was run simultaneously with the fashion show. A wide audience viewed the show on site and via live streams on the website. The company also opened additional HUGO stores in major European cities in the third quarter, most notably in London and Paris. With its unconventional layout and firmly integrated social media offers, the concept speaks to the fashion-forward customer of HUGO.
To strengthen its digital sales, in early October HUGO BOSS ramped up its partnership with the well-known online retailer Zalando and expanded the BOSS product range. The focus of the new cooperation model is the use of the Zalando Partner Programme platform by HUGO BOSS to serve customer requirements even better in the future. Under the partnership, HUGO BOSS independently manages the presentation and sales of BOSS Businesswear, which is available at Zalando for the first time.
On November 15, HUGO BOSS will be releasing information on the progress of its strategic initiatives and presenting its mid-term financial outlook as part of an Investor Day in London.