Luxury brands Hugo Boss and Richemont see China sales decline

Cartier-owner Richemont is facing slowing demand for its pricey products, particularly in China, where consumers have turned cautious as the economy falters

The German fashion company saw profits drop 40% to €70m during the period April to June. As a result it cut its profit guidance for the year citing weakness in China as well as the UK.

Shares in the German fashion company Hugo Boss plunged to the lowest levels since 2021 after the company slashed its profit guidance for the year, citing weakness in key markets such as China and the UK.

The brand is not the only luxury company seeing lagging sales in China as Cartier-owner Richemont also noted there has been a decline in the country, falling 27% over the last three months. Despite this, Richemont did post a slight rise in overall sales, with jewellery sales showing resilience, rising 4%.

Hugo Boss said it now expected operating profit of about €350m to €430m in 2024, down from a previous range of €430m to €475m. It also lowered its sales expectations from between €4.3bn and €4.45bn to between €4,2bn and €4.35bn. 

Its profit for the period April to June dropped by 40% to €70m. 

The shares slid as much as 11% on Tuesday to the lowest intraday level since April 2021.

Richemont, which also owns numerous luxury watch brands such as Vacheron Constantin, Jaeger-LeCoultre and Piaget, saw its sales increase 1% to €5.3bn, which was in line with analyst forecasts and compares with double-digit gains a year earlier.

Richemont shares edged down 0.5% in Zurich after initial gains. They are down 1.3% over the past 12 months.

The Swiss company is facing slowing demand for its pricey products, particularly in China, where consumers have turned cautious as the economy falters. Its watchmaking division posted an overall drop of 13% in the country.

The company said its sales were higher in all regions aside from the Asia Pacific region. 

Richemont’s report follows worse-than-expected financial results from Swiss watchmaking rival Swatch Group, which posted a 70% drop in profit it blamed on collapsing demand from China. Swatch shares rose 0.4% after sliding 9.8% on Monday, when it reported plummeting sales.

The luxury sector has delivered mixed reports in the latest earnings season. Shares of British brand Burberry Group extended Monday’s 16% tumble after the trench-coat maker suspended its dividend, replaced its CEO and warned it may report a loss for the first six months.

Bloomberg