Frankfurt - Hugo Boss, the embattled German fashion retailer, pledged to close stores that it can’t make profitable after reporting the biggest decline in quarterly profit in at least six years.
The company will decide within months on which shops it may close, and will save an additional 50 million euros this year by cutting costs and rents, Hugo Boss said in a statement on Tuesday. The stock, which lost half its value in the past year, was little changed at 56.11 euros as of 9.38am in Frankfurt. The shares gained as much as 3 percent earlier.
The German fashion label, best known for men’s apparel such as suits and jackets, is struggling with lacklustre luxury demand in Asia and discounting in the US that’s led to cuts in its profit outlook and cost former Chief Executive Officer Claus-Dietrich Lahrs his job. Hugo Boss said it expects improvement in sales and earnings this year, especially in the second half.
“We could see a much more significant review of retail space,” said Charles Allen, an analyst at Bloomberg Intelligence. “Eight stores closed in the quarter although openings still outpaced this.”
Earnings before interest, taxes, depreciation and amortisation and other items declined 29 percent to 93.5 million euros ($108 million) in the first quarter, the Metzingen, Germany-based company said. That missed the lowest analyst estimate compiled by Bloomberg, which was 95 million euros.
First-quarter sales in the US tumbled 16 percent adjusted for currency effects, while Chinese sales were down 11 percent. In Europe, revenue fell 2 percent on a slow tourist trade, especially in France and Belgium, Boss said.
“The market is focusing on the outlook,” said Cedric Rossi, an analyst at Bryan Garnier & Company in Paris. “Most of the downside risk is behind us now.”
Boss’s European business was hurt by tourists staying away from France and Belgium after a series terrorist attacks in recent months, he said.
Adding to the management turmoil, the company replaced brand chief Christoph Auhagen last month with company veteran Ingo Wilts, who will rejoin Boss as chief brand officer from Tommy Hilfiger by November 1.
“Without any form of concrete leadership or strategy in place, one could clearly surmise the stock is un-investible at this point,” wrote John Guy, an analyst at MainFirst Bank. “We have sympathy with this view. However, it also paves the way for fresh, radical thinking about future brand strategy and positioning.”
Boss reiterated its forecast for a low single-digit percentage increase in currency-adjusted sales this year and a low double-digit decline in Ebitda. Gross margin is expected to be unchanged from last year’s level.
BLOOMBERG