Shares of German luxury fashion house Hugo Boss plummeted up to 10% on Tuesday after the company slashed its sales outlook amid ongoing challenges in the luxury sector. The fashion brand now projects full-year sales to reach up to 4.35 billion euros ($4.73 billion), down from a previous forecast of 4.45 billion euros. This adjustment is attributed to persistent macroeconomic and geopolitical challenges, with China and the U.K. noted as particularly difficult markets.
By 9:53 a.m. London time, shares had slightly recovered but remained down 8.8%. CEO Daniel Grieder acknowledged the significant global macro uncertainty but expressed confidence in the company’s strategy to invest in its brands, BOSS and HUGO, to drive growth and gain market share.
This marks the second sales outlook cut for Hugo Boss this year; in March, the company forecasted a moderation in 2024 sales growth from 3%-6% to 1%-4% group currency growth. Preliminary second-quarter results revealed a 1% decline in group sales to 1.02 billion euros, primarily due to decreased sales in Asia and Europe. Operating profit for the quarter plummeted 42% year-on-year to 70 million euros, impacted by softer sales trends and strategic business investments. Grieder remains optimistic about a return to profitable growth in the latter half of the year.
The revised forecast comes as broader macroeconomic and geopolitical issues continue to hamper the luxury sector, with brands like Burberry and LVMH also experiencing slowed sales. Burberry’s shares dropped 16% following a dismal fiscal first-quarter performance, prompting a profit warning, a CEO replacement, and a dividend cut. Richemont reported just 1% sales growth at constant exchange rates in the first quarter, affected by a slump in Chinese sales.
Swetha Ramachandran of Artemis Fund Managers suggested the slowdown in Chinese consumer spending might be overstated, as many consumers are resuming overseas purchases. She noted that Japan has become a favored destination for Chinese shoppers due to the weak yen.
Original Story https://www.cnbc.com/2024/07/16/hugo-boss-shares-plunge-on-profit-warning-amid-slumping-china-demand.html
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