Hugo Boss shares fall as company becomes latest fashion retailer to cut forecast

By Louis Goss

Hugo Boss reported a decline in second-quarter sales, warning that a slowdown in the global economy would hit its revenue and profits for the full year 2024

Shares in Hugo Boss fell sharply on Tuesday after the suit seller followed rivals Burberry and Swatch Group in cutting its forecasts on concerns that a global economic slump could hit sales in key markets including the UK and China for the rest of 2024.

The fashion company, headquartered in Metzingen, Germany, said late Monday that “continued macroeconomic and geopolitical challenges” had led to a decline in demand for its products, which would affect its “revenue and net income performance” this financial year.

Shares in Frankfurt-listed Hugo Boss (XE:BOSS) fell 9% on Tuesday, after losing 50% of their value over the previous 12 months.

The company's cut in guidance comes as it reported worse-than-expected preliminary financial results for the second quarter of 2024, which saw it report a 1% drop in second-quarter sales to €1.02 billion and a 42% drop in earnings before interest and tax to €70 million.

“We are operating in a period of significant global macroeconomic uncertainty, which has also impacted our performance in the second quarter,” Hugo Boss CEO Daniel Grieder said in a statement, as the company prepares to release its full second-quarter results on August 1.

The company, founded by Hugo Ferdinand Boss in 1924, said it now expects sales to grow by 1% to 4% to 4.20 billion euros to 4.35 billion euros this year, compared with its previous forecast of 3% to 6% growth to 4.30 billion euros to 4.45 billion euros.

Hugo Boss is thus expected to generate earnings before interest and taxes of 350 to 430 million euros over the full year 2024, compared to a previous forecast of 430 to 475 million euros and against 410 million euros of EBIT over the full year 2023.

Hugo Boss's profit warning makes the fashion brand the latest to warn of the effects of a broader slowdown after British rival Burberry scrapped its dividend, cut its profit forecast and said it would replace its chief executive.

Burberry (UK:BRBY) said Monday that its CEO Jonathan Akeroyd will step down by mutual consent, to be replaced by former Michael Kors chief executive Joshua Schulman, who will become the British fashion house's fourth CEO in 10 years.

The London-based company has seen its share price fall by 19% since Monday morning, after the stock had already fallen by 65% ​​over the previous 12 months.

Swatch Group (CH:UHR) also said on Monday it expected a slowdown in China to hit its sales this year, after reporting a 14.3% drop in revenue to 3.4 billion Swiss francs ($3.8 billion) in the first half of 2024, leading to a 70.5% drop in net profit to 147 million Swiss francs over the same period.

“The group expects the Chinese market (including Hong Kong SAR and Macau SAR) to remain a challenge for the entire luxury goods industry until the end of the year,” the watch seller said.

RBC analysts, led by Manjari Dhar, still believe Hugo Boss “remains well positioned to continue gaining share in the premium apparel segment” over the long term, as they said the expansion of its Filderstadt warehouse could help “create significant cost savings.”

-Louis Goss

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07-16-24 09:34 ET

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