Hugo Boss predicts recovery after Hong Kong hit

[BERLIN] Hugo Boss expects sales and operating profit to recover in the fourth quarter, helped by more modern stores and growth in mainland China and ecommerce, after the German fashion house reported falling sales in the United States and Hong Kong.

Last month, Hugo Boss cut its 2019 earnings forecast and reported preliminary third quarter results that were below its expectations. It confirmed them on Tuesday.

Chief Executive Mark Langer said on Tuesday he expects a "significant" increase in operating profit in the fourth quarter, citing expansion in mainland China and its booming online business, which grew by 36 per cent in the third quarter.

Hugo Boss also expects to reap the fruits from investment in sprucing up its stores, like its flagship on the Champs Elysee in Paris, as well as positive reception to recent fashion shows in Milan and Shanghai.

Shares in Hugo Boss, which are down nearly 40 per cent in the last year, were up 1.4 per cent in early trade.

Third-quarter sales fell 8 per cent in the Americas on a currency-adjusted basis, which Hugo Boss blamed on a fall in demand in the United States from locals and tourists, as well as a decline in the wholesale channel as it sells more garments online.

Currency-adjusted sales growth slowed to 2 per cent in Asia due to a "significant double-digit" sales decline in Hong Kong, partially offset by continued strong momentum in mainland China. Thriving demand in mainland China also helped luxury handbag maker Hermes offset a sales growth slowdown in Hong Kong in the third quarter, and the company said that the momentum had carried into October.

REUTERS