Hugo Boss updates outlook amid "challenging" market conditions

Hugo Boss has reported a 1% drop in sales to £853 million (€1.015 billion) for the second quarter as challenging macroeconomic and geopolitical conditions continue to impact global consumer demand.

The company said these headwinds contributed to a further slowdown of industry growth, affecting the top- and bottom-line performance of Hugo Boss during the second quarter.

It added that the overall market environment remained "particularly challenging" in markets such as the UK and China, with revenues down 2% in EMEA and 4% in Asia/Pacific.

Despite this, the business said revenues continued to significantly exceed 2019 levels by more than 50% in the second quarter, reflecting its growth strategy over the last three years.

From a channel perspective, the company maintained its momentum in brick-and-mortar wholesale (+5%) in the second quarter, while revenues for business (-4%) came in below the prior-year level, despite "solid growth" online at Hugo Boss.

Revenues were also down in brick-and-mortar retail at 2%, reflecting lower store traffic. The overall softer consumer sentiment also affected the performances across brands.

Revenues for BOSS Menswear remained 2% below the prior-year level, while sales for BOSS Womenswear increased by 2%. At HUGO, sales were up by 3%, supported by the "successful" launch of its new, denim-focused brand line HUGO BLUE.

Operating profit in the second quarter amounted to £58 million (€70 million), compared to £101 million (€121 million) in the previous year. Besides the overall softer sales trends, additional marketing investments and higher brick-and-mortar retail costs also contributed to the decline, Hugo Boss revealed.

These factors were partially compensated by an improvement in gross margin to 62.9% as the company continued to "successfully drive efficiencies along its global sourcing activities".

However, as a result of the persistent macroeconomic and geopolitical challenges that are dampening global consumer demand, Hugo Boss has updated its full year outlook.

It now expects group sales to increase by 1-4% to an amount of around £3.5-3.6 billion (€4.20-4.35 billion), compared to sales of around £3.6-3.7 billion (€4.30-4.45 billion) previously.

Daniel Grieder, Chief Executive Officer of Hugo Boss, said: "We are operating in a period of significant global macro uncertainty, which also affected our performance in the second quarter.

"Although the timing of any macro recovery remains uncertain, our strategy of consistently investing in our strong brands, BOSS and HUGO, gives us confidence in our ability to continue driving above-trend growth and capturing further market share.

"By translating this sales performance and focusing even more on operating effectiveness, we have the ability to return to profitable growth in the second half. With the continued execution of our 'CLAIM 5' strategy, we are committed to driving substantial value creation for our shareholders going forward."