German fashion house Hugo Boss beat second-quarter expectations on Wednesday helped by restructuring and its first rise in US sales in two years, boosting its shares. The company, known for its smart men's suits, said US sales rose 2 percent while sales in China jumped 14 percent.
After a string of profit warnings, Hugo Boss has been slashing prices in China to bring them closer to European and US levels, making efforts to appeal to younger customers, investing in its website and closing loss-making stores. "Our strategic realignment is beginning to take effect... We made considerable headway in the United States and in online business in particular," Mark Langer, the former finance chief who took over as chief executive last year, said in a statement.
Net profit jumped fivefold to 57.6 million euros ($68 million) reflecting year-ago restructuring costs. That topped an average analyst forecast of 53 million euros. Sales rose 2 percent to 636 million euros, above the 619 million expected by analysts.
Hugo Boss shares, which trade at about a 10 percent discount to the luxury sector, rose 5 percent, making them one of the top risers on the Stoxx Europe 600. The most important positive from the results was that sales a second-quarter 3 percent rise in sales at its own stores on a same store, currency-adjusted basis, reversing a first-quarter 3 percent fall, DZ Bank analyst Herbert Sturm said.
A recovery in tourism in Europe and stronger Chinese consumption are expected to lead a rebound in the luxury sector this year, the Bain consultancy predicted in May, also helping brands such as Burberry and Hermes . Hugo Boss' online sales, which had fallen in the first quarter, rose 9 percent after the company took steps to speed up the loading time of its website, improve its ranking on search engines and offer more lower-priced garments.
Hugo Boss said the spring/summer 2018 collections for its revamped core brands BOSS and HUGO had been well received at recent fashion shows in Florence and New York, with particularly strong demand for its athleisure and casualware. Hugo Boss confirmed its outlook for stable sales for 2017 and a low double-digit percentage increase in net income. It raised its free cash flow target to around 250 million euros from around 220 million previously. It expects growth of sales and earnings in 2018 and for sales to outpace the market beginning in 2019.
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