Hugo Boss shares slide 10% as profits fall short for retailer

Profits missed expectations in the quarter despite sales rising 13% to €1.18bn. File picture: Gareth Chaney/Collins Photos

Hugo Boss shares ended 10% down on Tuesday after its fourth quarter operating profit missed expectations, adding to signs of strain among fashion retailers, though sales continued to grow.

Quarterly earnings before interest and tax came in at €121m, missing analysts' targets. Still, sales rose 13% to €1.18bn, boosted by a 33% jump in revenue in the Asia-Pacific region. Revenue increased by 7% in the Europe, Middle East and Africa region, and 18% in the Americas. 

In a context of rising wages, high interest rates, and fragile demand, the market is increasingly focused on companies' ability to protect profit margins.

"This is disappointing but not a disaster, and I think the share price reaction is exaggerated from my point of view," said Thomas Joekel, who manages a fund at Union Investment holding Hugo Boss shares. 

Boss' earnings miss also comes after profit warnings from Burberry and JD Sports, painting a worrying picture of demand for fashion brands. "It seems there is a broad deceleration in luxury and apparel," said Mr Joekel.

Shares in the German premium fashion group had gained 25% over 2023 as investors grew more confident about a brand revamp that has brought in new customers in Asia and helped it maintain sales momentum despite weak demand in Europe. 

Boss' fourth-quarter operating profit was likely dented by discounting, said RBC analyst Manjari Dhar. "The market in general has been more promotional across Q4 and Boss has had to follow suit in order to remain competitive," she said. 

For the full year, Hugo Boss sales reached €4.2bn, up from €3.65bn a year earlier. 

Reuters