Hugo Boss reported a 42% drop in second-quarter operating profit on Thursday, below market expectations, two weeks after the German fashion house slashed its annual forecasts as economic and geopolitical challenges dampen global consumer demand.

The luxury sector is grappling with weaker sales and margin pressures as inflation-hit shoppers cut back spending on designer fashion.

A property slump and job insecurity in China has exacerbated the problem.

“The weakening consumer sentiment in most markets led to a rapid slowdown in growth across the entire industry, which we could not completely escape from,” CEO Daniel Grieder said in a statement.

Hugo Boss stays strong in tough China, US markets

Hugo Boss said its earnings before interest tax (EBIT) fell to 70 million euros ($75.8 million) in the quarter, while analysts polled by LSEG were expecting 81.9 million euros on average.

Its quarterly net income slumped 50% year-on-year to 39 million euros.

Earnings from luxury companies this quarter have demonstrated the strain that the sector is under, with both LVMH and rival Kering falling short of forecasts.