- Prachi Singh |
REPORT_ The Hugo Boss Group achieved higher sales and earnings in the first nine months of 2014, on the back of sales growth in all regions and distribution channels in the third quarter. The Group's currency-adjusted sales rose by 9 percent in the third quarter. The company expects a currency-adjusted 6 percent to 8 percent increase in sales for the year as a whole. Operating profit (EBITDA before special items) is projected to grow between 5 percent and 7 percent.
“Thanks to improving business in the Americas and Asia/Pacific together with continued good expansion in Europe, we were able to achieve very solid growth in the third quarter,” says Claus-Dietrich Lahrs, the CEO of Hugo Boss, adding, “However, over the last few weeks, our business has been increasingly feeling the effects of the weak performance of the sector in Europe and uncertainties in Asia. That said, we are still confident of being able to achieve solid full-year sales and earnings growth and, thus, outpace the luxury goods sector as a whole.”
In euro terms, this reflects a 9 percent increase to 717 million euros (897.9 million dollars). This performance was spurred by the Americas and Asia/Pacific in particular, which contributed growth rates of 11 percent and 13 percent, respectively, in local currencies. Driven by an improving wholesale business, the pace of growth accelerated in the two core markets United States and China. With a currency-adjusted 8percent increase in sales, growth in Europe remained robust. However, momentum weakened across all regions towards the end of the reporting period, particularly in the Group's own retail business.
Currency-adjusted sales from the Group's own retail business (including outlets and online) were up 11percent on the same period of the prior year. On a comp store basis, currency-adjusted revenue growth in this channel came to 4 percent. Wholesale revenues climbed by 7percent after currency adjustment, benefiting from improved orders compared with the prior quarters and a shift in deliveries between the second and the third quarter.
The gross profit margin expanded by 60 basis points to 64.1percent, primarily as a result of the disproportionately strong growth of the Group's own retail business and reduced markdowns. EBITDA before special items was up 5percent on the prior year. Operating expenses rose particularly as a result of increased distribution and marketing expenses, causing the EBITDA margin to contract by 90 basis points to 25.4 percent. However, net income climbed by 2 percent.
In the first nine months, Hugo Boss sales grew by 8 percent in local currencies. Including negative exchange rate effects, sales in the reporting currency climbed by 6 percent. With a currency-adjusted 9 percent rise in sales, Europe was the fastest growing region, supported in particular by double-digit increases in the core markets Great Britain and Germany. Sales in the Americas rose by 6 percent in local currencies in the first nine months and sales in Asia/Pacific were up 7 percent on the prior year in the first nine months, with all markets in this region contributing to this growth.
Sales by distribution channel recorded a mixed performance in the first nine months. The Group's own retail business (including outlets and online) climbed by 16percent before currency effects. Comp store sales, after adjustment for currency effects, were up 4 percent on the prior year. The number of own retail stores increased by 18 in the first nine months to 1,028. In addition to 49 new openings, 17 stores previously operated by wholesale partners were taken over, while 48 stores, most of them smaller-sized and predominantly located in Europe and Asia, were closed. The Group’s wholesale revenues declined by 1 percent in local currencies due to challenging market conditions.
Menswear sales rose by 7 percent after currency adjustment in the first nine months and womenswear business expanded by 14 percent, supported by double-digit growth in clothing and in shoes & accessories. The greater share of sales from the Group's own retail business as well as reduced markdowns led to an increase of 180 basis points in the gross profit margin to 65.3 percent. EBITDA before special items was 4 percent up on the prior year. However, the adjusted EBITDA margin contracted by 40 basis points to 22.4 percent in the first nine months, but consolidated net income rose by 5 percent.
The management of Hugo Boss expects currency-adjusted sales to grow by 6 percent to 8 percent for the year as a whole. The Group projects further double-digit growth in its own retail business, while the wholesale business is set to remain more or less stable over the prior year. The Group plans to open around 50 new stores excluding takeovers.