Metzingen, March 7, 2019
Fiscal year 2018
- Currency-adjusted sales up 4%
- EBITDA before special items on prior year level
- Dividend increases to EUR 2.70 per share
Outlook 2019*
- Currency-adjusted sales expected to grow at a
mid-single-digit percentage rate - EBIT to increase at a high single-digit percentage rate,
thus faster than sales - Strong increase in free cash flow expected
"2018 was a good year for HUGO BOSS. 2019 will be an even better year for our Company,” says Mark Langer, CEO of HUGO BOSS AG. “The current year will be all about the execution of our Business Plan 2022. With the focus clearly set on our strategic priorities, we are ensuring profitable growth in 2019 and beyond. Strong momentum in our own online business and in Asia will make a significant contribution this year.”
In 2018, HUGO BOSS increased its pace of growth as planned. Sales grew by 4% in fiscal year 2018, adjusted for currency effects. The dynamic growth of the Group’s own retail business, especially its online business, was the main contributor here. Sales in the reporting currency reached EUR 2,796 million, up 2% compared to the prior year. At EUR 489 million, EBITDA before special items was roughly on the prior year level and hence in line with expectations. Positive effects from higher sales and consistent cost management were offset by strategic investments in product quality and in the digital transformation of the business model. In addition, earnings development was negatively impacted by currency effects.
More than EUR 100 million in sales in the Group’s own online business
HUGO BOSS has made significant progress in implementing its strategic priorities. Besides the successful realignment of the BOSS and HUGO brands, which customers experienced in stores for the first time with the Spring/Summer 2018 collections, the Group also successfully further developed its distribution strategy. HUGO BOSS saw strong double-digit growth in its own online business in particular, reaching sales of more than EUR 100 million for the first time. The Group also made major progress in its brick-and-mortar retail business. In addition to the further optimization of the store portfolio, the focus was on consistent renovation of BOSS stores and opening the first HUGO stores with their own concept in selected metropolises, including Paris and London. Moreover, HUGO BOSS made very good progress in the digitization of its business model. The Group is increasingly developing and distributing its collections digitally so that it can respond faster to market trends and keep its finger on the pulse of the times with its brands.
Overproportionate growth expected in Asia/Pacific
For 2019, HUGO BOSS expects to increase currency-adjusted sales at a mid-single-digit percentage rate. All regions will contribute to this, with overproportionate growth expected in Asia/Pacific. For the Group’s own retail business, sales are expected to increase at a mid- to high single-digit percentage rate. Sales on a comp store and currency-adjusted basis are expected to grow at a mid-single-digit percentage rate. The own online business should see strong double-digit growth also this year and, in doing so, contribute overproportionately to growth in the Group’s own retail business. The gross profit margin is expected to increase by up to 50 basis points compared to 2018. The growing share of sales from the Group’s own retail business and improved markdown management should have a particularly positive impact. Operating income (EBIT) is expected to grow at a high single-digit percentage rate in 2019, hence faster than sales. This will primarily be the result of the expected increase in gross profit.
The current year will therefore be all about the execution of the Business Plan 2022. In particular, the strengthening of partnerships with online retailers in the concession model, the consistent renovation of BOSS stores with the new store concept, the continuous expansion of personalized offerings, and the acceleration of operating processes are expected to drive growth. In addition, the efficiency program launched in November should yield its first positive results.
BOSS presents its Fall/Winter 2019 collections at New York Fashion Week
The appeal of both the BOSS and HUGO brands is expected to be further strengthened following their successful realignment last year. The Group has already presented the first highlights of its coming Fall/Winter 2019 collections of BOSS Menswear and BOSS Womenswear, at the New York Fashion Week in February. Highlighting the event as “BOSS Curated,” the art of sophisticated style was celebrated with fine attention to detail, modern silhouettes and unique materials with artistic highlights.
You can find out more at group.hugoboss.com. The online version of the
HUGO BOSS annual report can also be found there, with many interactive features and a video statement by Chief Executive Officer Mark Langer.
Earnings development for the full year of 2018
- Sales of the HUGO BOSS Group rose by 2% to EUR 2,796 million in 2018 (2017: EUR 2,733 million). On a currency-adjusted basis, the increase was 4%.
- All regions recorded currency-adjusted sales increases. In Europe, currency-adjusted sales grew by 4%, driven by double-digit growth in Great Britain. The Americas also recorded a currency-adjusted sales increase of 4%, mainly due to mid-single-digit growth in the U.S. Sales growth in Asia/Pacific benefited from high single-digit growth in the Chinese market. Adjusted for currency-effects, sales in Asia/Pacific grew 7%.
- Currency-adjusted sales in the Group’s own retail business grew by 4%, supported by increases in all sales formats. With strong double-digit growth of 41%, sales in the own online business increased in particular. Comp store sales were up 5% on the prior year’s level. Wholesale also recorded a currency-adjusted increase in sales of 5%. This was due both to high single-digit growth in the replenishment business, which allows HUGO BOSS to react to short-term demand from wholesale partners, as well as positive effects resulting from delivery shifts. Sales in the license business were down 4% on the prior year.
- The BOSS and HUGO brands developed heterogeneously. While BOSS achieved currency-adjusted sales growth of 6%, HUGO recorded a sales
decrease of 4%. BOSS benefited in particular from high single-digit growth in businesswear and casualwear. HUGO recorded strong double-digit growth in casualwear. However, this was more than offset by declines in businesswear caused by changes in the distribution strategy. - The decline in gross profit margin is mainly due to investments in the product quality. Currency effects also had a slightly negative impact on the gross margin development.
- Operating expenses were slightly down on the prior year, both in absolute terms and relative to sales. A slowdown in retail expansion and positive effects from
renegotiated rental contracts in the Group’s own retail business in particular led to a decrease in selling expenses. The increase in administrative expenses was
attributed in particular to investments in the digital transformation of the business model. - Net expenses arising from other operating income and expenses were mainly due to organizational changes. Furthermore, the item includes expenses that arose from the recognition of a provision for liabilities in the context of the former
production site in Cleveland, Ohio, United States. - EBIT rose by 2%. However, the EBIT margin declined by 10 basis points. Net income was also up by 2% in fiscal year 2018.
- EBITDA before special items recorded a stable development. Positive effects resulting from the increase in sales and the consistent cost management were offset by investments in product quality and in the digital transformation of the business model. Currency effects had an overall negative impact on earnings development.
Earnings development by segment for the full year of 2018
- Segment profit in Europe was up on the prior year. The increase in sales more than offset slightly higher operating expenses. At 31.1%, the adjusted EBITDA margin was up 10 basis points on the prior year (2017: 30.9%).
- In the Americas, segment profit was significantly below the prior year. This was primarily due to the decline in gross profit, mainly as a result of negative currency effects. This more than offset the positive effect of lower operating expenses. The adjusted EBITDA margin, at 17.2%, was consequently 340 basis points below the prior year level (2017: 20.6%).
- The increase in segment profit in Asia/Pacific is attributed to the positive sales development as well as a decline in operating expenses. The adjusted EBITDA margin was 24.2%, up 120 basis points on the prior year level (2017: 23.0%).
- Lower sales in the license business weighed on the segment profit in 2018.
Net assets and financial position for the full year of 2018
- Trade net working capital (TNWC) increased as compared to the prior year, primarily reflecting higher inventories. However, the Group expects a gradual reduction of inventories in 2019.
- Capital expenditure in 2018 was well above the prior year. Modernization of the own retail network, investments in selective new openings and in the IT
infrastructure were the focus of investment activity in fiscal year 2018. - The development offree cash flow reflects the increased cash outflow as a result of the higher inventories and the higher investment volume.
- Net financial liabilities remained at a low level at year-end. As a result, the Group was almost debt-free at the end of the year.
Dividend proposal for 2018
- The Managing Board and Supervisory Board of HUGO BOSS AG intend to
recommend a five-cent increase in dividend, to EUR 2.70 per share, at the Annual Shareholders’ Meeting for fiscal year 2018 (2017: EUR 2.65). This is equivalent to a payout ratio of 79% of the net income attributable to the equity holders of the parent company in 2018 (2017: 79%). This means that the payout ratio remains at the upper end of the target corridor for future dividend payments. This provides for a payout of between 60% and 80% of the profit attributable to the equity holders.
Network of freestanding retail stores
- The number of own freestanding retail stores increased by three in fiscal year 2018, to 442 (December 31, 2017: 439).
- 13 newly opened BOSS stores, mainly in Europe and Mainland China, were offset by 22 closures of BOSS stores with expiring leases. In two cases, this
reflects the relocation of sites within the same metropolitan area. - In addition, twelve HUGO stores with their own store concept were opened in selected major cities, including London and Paris.
- Including shop-in-shops and outlets, the total selling space of the Group’s own retail business declined by 1% at year-end to around 154,500 sqm (December 31, 2017: 156,500 sqm).
- Selling space productivity in the brick-and-mortar retail business rose by 1% to around EUR 10,700 per sqm (2017: EUR 10,600 per sqm).
Outlook 2019*
- HUGO BOSS expects to increase Group sales in 2019 at a mid-single-digit
percentage rate on a currency-adjusted basis. Growth is therefore expected to be stronger than that of the relevant market segment. - The Group assumes that sales in Europe will increase by a low to mid-single-digit percentage rate adjusted for currency effects. Based on the assumption of further increases in the U.S. business, currency-adjusted sales in the Americas should also increase at a low to mid-single-digit percentage rate in 2019.
In Asia, currency-adjusted sales are forecast to grow by mid- to high single-digit percentage rates, driven by significant growth in the Chinese market. - For the Group’s own retail business, sales in 2019 are expected to grow at a mid- to high single-digit percentage rate on a currency-adjusted basis. The forecast is based on the assumption that comp store sales will grow at a mid-single-digit percentage rate. The online businesswill contribute overproportionately to the growth of the Group’s own retail business again in 2019. Wholesale sales for the current year are expected to be slightly below the prior year’s level, mainly
- reflecting the ongoing conversion of online platforms into concession businesses. License sales should grow in the mid-single-digit percentage range.
- HUGO BOSS aims to increase the Group’s gross profit margin in 2019 by up to 50 basis points compared to the prior year. Above all, the growing share of sales from the Group’s own retail business should have a positive impact on the gross profit margin. In addition, an improved markdown management should also
contribute to the increase in gross profit margin. - Starting in fiscal year 2019, EBIT will replace EBITDA before special items used by the Group up through 2018 as one of its key performance indicators. The future focus on EBIT and the associated inclusion of depreciation and amortization of fixed assets is intended to further increase the focus on capital efficiency. The Group expects EBIT to increaseat a high single-digit percentage rate in 2019. Above all, the predicted increase in gross profit is expected to contribute to this. The Group’s net income should also grow at a high single-digit percentage rate compared to the prior year.
- Capital expenditure is expected to increase to a level between EUR 170 million and EUR 190 million in 2019. Investment activity will focus on the Group’s own retail business and its IT infrastructure.
- The Group expects a free cash flow of between EUR 210 million and EUR 260 million for the current year. The targeted increase compared to the prior year particularly reflects the expected higher operating profit as well as the projection of a significantly reduced cash outflow from changes in trade net working capital.
- HUGO BOSS has decided not to take into account the impact of IFRS 16 in its outlook for fiscal year 2019. This should allow for better comparability of the
results of fiscal year 2018 with the outlook for fiscal year 2019. The Group assumes, according to current knowledge, that the first-time application of IFRS 16 in fiscal year 2019 will cause an increase in operating profit (EBIT) by an amount in the low double-digit millions of euros. At the same time, the Group’s net income is expected to be reduced by an amount in the single-digit millions of euros. For free cash flow, an increase in the low triple-digit millions of euros is expected based on the first-time application of IFRS 16. - A detailed presentation of the outlook for HUGO BOSS for 2019 can be found in the Annual Report 2018
Financial calendar and contacts
March 7, 2019
Full Year Results 2018,
Conference calls for media representatives as well as financial analysts and investors
May 2, 2019
First Quarter Results 2019
May 16, 2019
Annual Shareholders‘ Meeting
August 1, 2019
Second Quarter Results 2019 & First Half Year Report 2019
November 5, 2019
Third Quarter Results 2019
If you have any questions, please contact:
Dr. Hjördis Kettenbach
Head of Corporate Communications
Phone: +49 7123 94-83377
Email: hjoerdis_kettenbach@hugoboss.com
Christian Stöhr
Head of Investor Relations
Phone: +49 7123 94-87563
Email: christian_stoehr@hugoboss.com
* Not considering the anticipated impact of IFRS 16. A full description of the expected impact of IFRS 16 can be
found in the Annual Report 2018 (Notes to the Consolidated Financial Statements).
