Pedestrians walk past a store of German luxury fashion house Hugo Boss at Shenzhen Bao’an International Airport.
Alex Tai | SOPA Images | LightRocket | (Getty Images)
Hugo Boss Shares fell as much as 10% on Tuesday after the corporate cut its sales forecast, becoming the most recent high-end fashion line to warn of ongoing problems in the posh sector.
The German fashion house said on Monday that it expects annual sales of as much as 4.35 billion euros (4.73 billion dollars), a slight decrease from previous forecast of as much as 4.45 billion euros.
The company attributed the revised forecast to “ongoing macroeconomic and geopolitical challenges,” citing China and the United Kingdom as particularly difficult markets.
The shares were capable of reduce their losses barely and were down 8.8 percent at 9:53 a.m. London time.
“We are operating in a period of significant global macroeconomic uncertainty, which also impacted our second quarter performance,” CEO Daniel Grieder said in a press release.
“Although the timing of an overall economic recovery remains uncertain, our strategy of consistently investing in our strong BOSS and HUGO brands gives us confidence in our ability to continue to achieve above-average growth and gain further market share,” he added.
The forecast cut is the corporate’s second this yr, after the retailer said in March that sales growth would likely slow to three to six percent in 2024. Monday’s revision further softens that concentrate on to 1 to 4 percent growth in group currency.
Hugo Boss’s group sales fell by 1 percent to 1.02 billion euros within the second quarter on a preliminary basis, which was mainly as a consequence of declines in Asia and Europe, it said on Monday.
Operating profit within the second quarter fell by 42 percent to 70 million euros in comparison with the identical period last yr, as a consequence of “weaker sales trends and strategic investments in the business,” the corporate said in its preliminary report.
Grieder said he expects the corporate to return to profitable growth within the second half of the yr.
The revised outlook comes against a backdrop of macroeconomic and geopolitical concerns weighing on the posh sector normally, with other luxury brands reminiscent of Burberry and LVMH also reporting declines in sales.
Burberry shares fell 16 percent on Monday after the corporate issued a profit warning, replaced its CEO and cut its dividend as a consequence of disappointing first-quarter performance. The company was trading 1.3 percent lower at 9:50 a.m. London time.
The Swiss luxury group Richemont on Monday reported only reported sales growth of 1% at constant exchange rates in the primary quarter, as a slump in Chinese sales weighed on the corporate’s results.
Weaker demand within the once-lucrative Chinese market has been a big drag on the posh sector for several quarters because the world’s second-largest economy struggles to get better from the pandemic.
Swetha Ramachandran, global equity fund manager at Artemis Fund Managers, told CNBC that the slowdown in Chinese consumer spending could also be overdone, with many Chinese once more making their expensive purchases abroad.
“Before the pandemic, about 70 percent of Chinese consumers’ luxury demand was outside mainland China. With the lockdown, when no one could travel anymore, it all shifted back to mainland China,” she told CNBC’s “Squawk Box Europe” on Tuesday.
“Now that people are on the move again, they are also moving back abroad. That partly explains the strength of these other Asian destinations that Chinese travelers are favoring at the moment,” she added, noting that Japan has proven particularly popular with international shoppers given the weak yen.
