The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
METZINGEN, Germany — Hugo Boss AG plunged to a nine-year low after the German suitmaker cut its full-year outlook on weakness in the US and Hong Kong, casting doubt on Chief Executive Mark Langer's turnaround efforts.
The guidance reduction comes two months after the suitmaker previously lowered its outlook, citing weak sales to tourists and pricing pressure in the US. Now the anti-Beijing protests in Hong Kong, which led to a plunge in visits by mainland Chinese luxury shoppers, are creating a new headache. The stock fell as much as 13 percent Friday morning.
The company’s turnaround efforts have gone awry since it replaced its chief executive with then-chief financial officer Langer in 2016, as suitmakers struggle to adjust to the trend toward casual office attire. Hugo Boss set out a plan last year to shift toward a faster-fashion model, speeding up production, personalising its clothes more and boosting e-commerce.
“We see no end to this pressure,” wrote Piral Dadhania, an analyst at RBC Europe, slashing his price target by more than a quarter to €50. “Hugo Boss is clearly not immune.”
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The announcement weighed on other apparel makers, with Burberry Group Plc shares diving as much as 4.1 percent. Ted Baker Plc fell as much as 3.6 percent.
Hugo Boss had expected sales to grow faster in Asia, which has been driving the fashion industry’s sales. Luxury conglomerate LVMH said Thursday that sales in Hong Kong fell 40 percent in August and September.
What Bloomberg Intelligence Says:
“Hugo Boss’s profit warning still leaves it with a challenge in 4Q to meet new expectations of a 3 percent fall in 2019 reported Ebit, we believe, given underlying reasons behind the warning are still in place.”
The fashion house said it expects currency-adjusted sales to increase by a low single-digit percentage this year, down from previous guidance for an increase at the lower end of a mid-single-digit range. Sales in the third quarter were flat from a year earlier.
The suitmaker also now expects a decline in operating profit to a range of €330 million and €340 million. It previously forecast an increase from last year’s €347 million.
By Eric Pfanner; editors: Eric Pfanner and John Lauerman.
Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.
Consumers face less, not more, choice if handbag brands can't scale up to compete with LVMH, argues Andrea Felsted.