METZINGEN, Germany — Hugo Boss expects sales and operating profit to recover in the fourth quarter, helped by more modern stores and growth in mainland China and e-commerce, after the German fashion house reported falling sales in the United States and Hong Kong.
Last month, Hugo Boss cut its 2019 earnings forecast and reported preliminary third quarter results that were below its expectations. It confirmed them on Tuesday.
Chief Executive Mark Langer said he expected a "significant" increase in operating profit in the fourth quarter, citing expansion in mainland China and the booming online business, which grew by 36 percent in the third quarter.
E-commerce was powered by improvements to the Hugo Boss website and expansion into Scandinavia and Ireland, and Langer said he expected the strong online momentum to continue into the fourth quarter.
Shares in Hugo Boss, which are down by almost 40 percent in the last year, were flat at 9.13am GMT.
Hugo Boss also expects to reap the fruits from investment in sprucing up its stores, like its flagship on the Champs-Élysées in Paris, where Langer said sales had been very strong in October, as well as recent fashion shows in Milan and Shanghai.
Known for its smart suits, the company's strategy of introducing more casual and sportswear styles to appeal to a younger audience has been paying off, with third-quarter sales of its trendier Hugo label rising a currency-adjusted 6 percent.
However, sales fell 8 percent in the Americas, which Hugo Boss blamed on a fall in demand in the US from locals and tourists, as well as a decline in the wholesale channel as it sells more garments online.
Overall, the group's own retail business, which includes e-commerce, saw currency-adjusted sales rise by 3 percent in the third-quarter, while the wholesale business fell 5 percent.
Sales growth slowed to 2 percent in Asia due to a "significant double-digit" sales decline in Hong Kong, which usually accounts for a quarter of its greater China sales, partially offset by continued strong momentum on the mainland. Thriving demand in mainland China also helped luxury handbag maker Hermès offset a sales growth slowdown in Hong Kong in the third quarter, and the company said that the momentum had carried on into October.
As unrest escalates in Hong Kong, Langer said he did not expect any recovery soon, noting stores had been forced to close on important weekend shopping days, prompting Hugo Boss to shift stock from Hong Kong to other Asian markets.
By Emma Thomasson; editors: Michelle Martin and Emelia Sithole-Matarise