PARIS – Hugo Boss’ turnaround efforts are paying off.
The German company said Tuesday that it had achieved its revised turnover target for 2023, with preliminary, non-audited sales for the year coming in at 4.2 billion euros, up 15 percent at reported rates and 18 percent at constant currency, at the top end of its most recent guidance.
“We ended 2023 on a high note, making it a record year for Hugo Boss,” said chief executive officer Daniel Grieder. He said that double-digit improvements in both sales and profits in the fourth quarter “are all the more remarkable considering the current challenging global market environment.”
Hugo Boss’s strong results come in contrast with broadly lackluster expectations for Q4 performance for luxury players expected in the coming days.
Burberry slashed its earnings expectations for fiscal 2024 late last week on the back of weaker-than-anticipated holiday trading, and markets are bracing for further signs of a luxury slowdown. Next to report numbers will be Compagnie Financière Richemont, later this week.
HSBC analysts said in a research note that luxury demand had been weaker than it expected during the holiday season, with aspirational customers put off by the higher prices implemented by brands over the past three years. “We see few catalysts for the luxury sector before April/May 2024,” the analysts wrote.
But Boss bucked the trend. “Boss’s Q4 release shows sales defying relative consumer gravity as its products continue to resonate, underpinning ongoing substantial market share gains,” wrote Frederick Wild and fellow analysts at Jefferies.
“We think that Boss is continuing to benefit from good brand momentum, supported by an improved product offering and a wider demographic appeal,” said RBC Capital Markets analyst Manjari Dhar.
Hugo Boss trumpeted broad-based growth in Q4 across brands, regions and distribution channels as it continued to implement its Claim 5 growth strategy, aimed at helping the company transition from a men’s formalwear specialist to a 24/7 lifestyle house.
Constant-currency preliminary sales gained 13 percent in the three-month period. On a reported basis, sales were up 10 percent to 1.18 billion euros, the company’s highest ever revenues in a single quarter.
Geographically, the Americas were particularly strong, with revenues up 18 percent in constant-currency terms, boosted by the U.S. Sales were up 7 percent in Europe, the Middle East and Africa, bolstered by Germany and France, and double-digit gains in emerging markets. In Asia-Pacific, constant-currency sales were up 33 percent, driven by strong improvements in China as well as Southeast Asia and the Pacific region, the company said.
Thanks to its turnaround plan, Hugo Boss said that subject to year-end closing procedures, it anticipates operating profit for 2023 to rise 22 percent to 410 million euros. Jefferies’ analysts warned that Boss’s Q4 EBIT– up 17 percent to 121 million euros on a preliminary basis – was below expectations, but said “With inventory well-controlled, limiting promo risks, substantial [cost-of-goods-sold] tailwinds for the first nine months, and a healthy LFL helping leverage [operating expenditure], we continue to believe the set up into 2024 is strong.”
Shares in Hugo Boss were changing hands at 58.10 euros in midday trading Tuesday, down 12.4 percent on Monday’s closing price.
The company will release its full annual results on March 7.
