Abu Dhabi, UAEFriday 15 November 2019

Hugo Boss plunges after cutting outlook on Hong Kong and US woes

The company’s turnaround efforts have gone awry since it replaced its chief executive in 2016

Hugo Boss expects sales to grow faster in Asia, which has been driving the fashion industry’s sales. Reuters
Hugo Boss expects sales to grow faster in Asia, which has been driving the fashion industry’s sales. Reuters

Hugo Boss plunged to a nine-year low after cutting its full-year outlook, saying economic uncertainty in North America and political unrest in Hong Kong are crimping sales of the German company’s products.

The guidance reduction comes two months after the suitmaker previously lowered its outlook, citing weak sales to tourists and pricing pressure in the US. Now the anti-Beijing protests in Hong Kong, which led to a plunge in visits by mainland Chinese luxury shoppers, are creating a new headache. The stock fell as much as 11 per cent Friday.

“Business in Hong Kong has been substantially negatively affected since the beginning of the political unrest and demonstrations,” the company said in a statement.

The company’s turnaround efforts have gone awry since it replaced its chief executive in 2016, as suitmakers struggle to adjust to the trend toward casual office attire. Current chief executive Mark Langer set out a plan last year to shift toward a faster-fashion model, speeding up production, personalising its clothes more and boosting e-commerce.

Hugo Boss also expected sales to grow faster in Asia, which has been driving the fashion industry’s sales. Luxury conglomerate LVMH said on Thursday that sales in Hong Kong fell 40 per cent in August and September.

Hugo Boss said it expects currency-adjusted sales to increase by a low single-digit percentage this year, down from previous guidance for an increase at the lower end of a mid-single-digit range. Sales in the third quarter were flat from a year earlier.

“We see no end to this pressure, particularly in North America and Europe, from which Hugo Boss is clearly not immune,” wrote Piral Dadhania, an analyst at RBC Europe, slashing his price target by more than a quarter to €50.

The suitmaker also now expects a decline in operating profit to a range of €330 million (Dh1.3 billion) and €340m. It previously forecast an increase from last year’s €347m.

Updated: October 11, 2019 05:58 PM

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