Shares in Hugo Boss rise on sales update as H&M fall

German fashion house Hugo Boss’ 2016 operating profit will be bigger than feared following a fourth-quarter sales recovery in China and Britain which upped their value as much as 10%.
Shares in Hugo Boss rise on sales update as H&M fall

But shares in Sweden’s budget fashion retailer H&M — the world’s second-largest clothing retailer after Inditex — fell as its sales update lagged expectations.

Revenue in Asia, where Hugo Boss makes almost a fifth of sales, rose a currency-adjusted 5% in the fourth quarter, recovering from a 3% fall in the third after it cut prices in China closer to European and US levels.

The firm said like-for-like sales had risen almost 20% in mainland China, adjusted for currency effects.

It forecast operating profit for 2016 would reach the better end of its forecast for a decline of between 17% and 23%. It publishes its final 2016 results on March 9.

Shares in the company, down 12% in the last year after sliding profits and analyst downgrades, posted the biggest rise on the German mid-cap index.

“The positive earnings surprise indicates Hugo Boss’ business is improving and market expectations are still low,” said Commerzbank analyst Andreas Riemann, who rates the stock a “buy”.

Shares in rivals such as LVMH and Gucci owner Kering have rallied in recent months as Chinese customers, the biggest buyers of luxury goods making up more than a third of global demand, have been re-opening their wallets.

However, Hugo Boss continues to trade at a discount to the sector due to concerns over upheaval as new chief executive Mark Langer seeks to revive the business.

Mr Langer, the former finance chief who took over in May, is returning Hugo Boss to its roots selling men’s suits after his predecessor sought to make the label more of a luxury brand and invested heavily in promoting womenswear.

He has also announced plans to close some stores.

Other premium brands such as Burberry reported a boost to sales from tourists coming to Britain to take advantage of a fall in the pound since the Brexit vote.

H&M yesterday reported a 6% year-on-year increase in local currency sales in December, the slowest pace since September and lagging expectations.

H&M, which has the bulk of sales in Europe, has in the past year blamed several monthly sales misses on unseasonable weather.

Like its rivals, H&M has underperformed Inditex, partly because the Zara owner has a supply chain that enables it to react more quickly to shifts in demand. H&M will publish its full earnings report on January 31.

— Reuters

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