Despite some rocky waters in the Chinese and U.S. markets, German fashion titan Hugo Boss (ETR:BOSSn) is standing tall. They’ve just amped up their sales and profit projections, thanks to a solid 20% surge in second-quarter revenues. A dash of brand sprucing and a good old marketing blitz played a big part in beating the odds amidst slow industry demand in both China and the U.S.
Here’s the thing, this high-end fashion powerhouse has managed to keep its chin up, even with the U.S. and European markets taking it slow. They’ve even ramped up their sales game in Asia, and that’s despite China’s recovery not quite hitting the mark.
It’s been a nail-biting time for luxury goods stocks with the speed of China’s post-pandemic recovery causing some jitters. But hey, Hugo Boss hasn’t been fazed! They’ve reported a whopping 56% surge in China’s sales compared to a year ago. Plus, their EMEA and Americas branches are basking in the glow of a tourism boost.
In the first half alone, the retailer proudly swung open the doors to 17 new Boss stores, six of which are in Asia. CEO Daniel Grieder is even hinting at the grand opening of a larger-than-life store in Guangzhou, China’s fifth-largest city, sometime in the last quarter. According to Grieder, China remains a game-changer for Hugo Boss.
So, while Hugo Boss’s shares took a minor dip of 1%, it’s worth noting they’ve actually seen an impressive 32% uptick this year. Deutsche Bank analysts reckon the market was all set for a guidance increase, but warned the retailer’s bulging inventories might cause a few raised eyebrows.
Thanks to this inventory surplus, Hugo Boss expects a slight increase in trade net working capital, somewhere in the range of 18% to 19%. This comes after a 53% surge in the first half alone, which reflects a common challenge in the retail sector worldwide after last year’s supply chain upheavals.
But fear not, Hugo Boss is set to start chipping away at those inventories in the second half. Their goal is to bring it down to under 20% of group sales by 2025, from a staggering 56.6% at the end of June.
This fashionable powerhouse raked in quarterly sales of 1.03 billion euros ($1.13 billion), up from 878 million a year ago. It’s clear the Boss and Hugo brands are getting some love, particularly from the younger crowd. And the good news doesn’t stop there – they’re expecting a 12% to 15% increase in annual sales, which could reach a sweet 4.1 billion to 4.2 billion euros.
By 2023, Hugo Boss has its sights set on an operating profit increase of 20%-25%, aiming for a cool 400 million to 420 million euros. Clearly, despite a few headwinds, Hugo Boss is dressed for success.
($1 = 0.9097 euros)
