Hugo Boss Quarterly Operating Profit Drops 11 Percent

Hugo Boss Black Ad Campaign Spring 2013 | Source: Hugo Boss

METZINGEN, Germany — Hugo Boss AG said first-quarter operating profit fell 11 percent as the German luxury-clothing maker changed its collection cycle and economic conditions remained difficult in Europe.

Earnings before interest, taxes, depreciation, amortisation and one-time items fell to 132.6 million euros ($174.6 million) from 148.4 million euros a year earlier, the Metzingen, Germany-based company said in a statement today. The average estimate of nine analysts surveyed by Bloomberg was 135.1 million euros. Wholesale revenue adjusted for currency effects declined 14 percent, Hugo Boss said.

“The market environment proved to be very challenging in the early months of this year,” chief executive officer Claus-Dietrich Lahrs said in the statement. “With a better performance of the wholesale business in the further course of this year, we shall return to renewed growth in the second quarter.”

Hugo Boss, which sells men’s suits for 400 euros and women’s pumps for 200 euros, doubled its number of collections to one per season. The switch to four fashion lines a year will affect deliveries at the wholesale business in the first quarter after “supporting” them in the fourth quarter, Andreas Riemann, an analyst at Commerzbank AG, wrote in a report on April 22.

Hugo Boss posted a 21 percent increase in fourth-quarter revenue at its wholesale business partly because of the new delivery cycle, the company said in February.

Revenue fell 2 percent to 593.5 million euros, the company said. The average estimate of 11 analysts surveyed by Bloomberg was 607.6 million euros. Revenue adjusted for currency effects gained 1 percent in Asia while sales in Europe dropped 5 percent. Hugo Boss still expects sales adjusted for currency effects to rise at a “high single-digit rate” this year.

Retail sales, which exceeded wholesale in 2012 for the first time, will be the “growth engine” this year, Lahrs said in March. The retailer, controlled by buyout firm Permira Advisers LLP, will spend more this year as it expands its own store network, Lahrs said.

Revenue at Hugo Boss’s own stores gained 15 percent in the first quarter.

Hugo Boss aims for revenue of 3 billion euros and EBITDA of 750 million euros in 2015, with the retail business representing about 55 percent of revenue by that year.

Permira, based in London, acquired a majority holding in Valentino Fashion Group SpA in 2007. Valentino was Hugo Boss’s parent company at the time. Permira owns about 66 percent of Hugo Boss, according to data compiled by Bloomberg. The stock price has more than doubled since the end of 2007.

By: Julie Cruz in Frankfurt; Editors: Marthe Fourcade, Celeste Perri