German luxury brand Hugo Boss has warned of possible delays in reaching its ambitious 2025 sales target due to sluggish consumer demand, particularly in China. Major difficulties in the Chinese market negatively affect Hugo Boss’s profits.
The company’s third-quarter earnings report showed: Slight gain above expectations but it also highlighted ongoing challenges in the Chinese market. The company’s share price fell more than 4% to 41.2 euros in Frankfurt, erasing the previous week’s gains.
Hugo Boss’ posts so far this year fell 39 percentThat makes it one of the worst performers on the Euro-Stoxx 600 index and underscores continued growth challenges for European luxury brand companies amid China’s economic slowdown.
Moderate revenue growth due to weak demand
Hugo Boss’s revenue in the third quarter amounted to €1.03 billion, up a modest 1% year on year when adjusted for exchange rates. Growth Seen in European markets and in the Americas, sales increased 1% in EMEA and 4% in the Americas.
The improved results, particularly in the EMEA region, mainly reflect: Increasing income in GermanyThis offsets the downward trend in sales in France and the UK.
However, sales in Asia-Pacific fell 7%, following a 4% decline in the previous quarter. The company describes these results as “ongoing macroeconomic and geopolitical uncertainty“This is impacting global demand, particularly in China, where low consumer interest has undermined results.
Profit margin and operating income challenges
Hugo Boss’s profit margin fell to 60.2%, down 50 basis points from the previous year. Although sourcing helps offset rising freight costs, the overall promotional environment and weak regional sales decrease in profit margin.
Earnings before interest and tax (EBIT) decreased by 7%Up to 95 million euros. However, cost management efforts allowed Hugo Boss to exceed analysts’ expectations by €90 million.
Despite the decrease, Hugo Boss predicts: Greater efficiency gains in procurementIt cited “more favorable product costs, offsetting rising global freight rates, negative channel and regional mix effects, as well as an overall promotional environment.”
The strategic goal in question
Launched in 2021, Hugo Boss’s CLAIM 5 strategy aims to increase market relevance, digital innovation and sustainability to accelerate growth. Strengthen your brands until 2025We aim to double sales to 4,000 million Euros.
In June, Hugo Boss increased this target to 5 billion euros and the expected profit was 600 million euros and accumulated free cash flow of approximately €2.5 billion between 2021 and 2025.
However, the company warned that achieving these revenue and profit growth targets by 2025 may be unsustainable due to the global economic crisis. demand weakness In China, according to CFO Yves Mueller. The company is focused on achieving its goals but is unsure of the exact timeline.
Outlook for 2024
In its 2024 forecast, Hugo Boss predicts that the group’s sales will Increase between 1% and 4%Between 4,200 and 4,350 million euros, as the impact of currencies may have a slight negative impact on revenue. The German company continues to forecast profits between 350 and 430 million euros.
CEO Daniel Grieder commented: “In the third quarter, Hugo Boss solid revenue improvements despite weak consumer confidence.
“This is clear evidence of the strength of Boss and Hugo that we have built through consistent application over the last few years.” CLAIM 5 our strategy” he added.
