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Hugo Boss Reaffirms 2023 Outlook amid Luxury Downturn, Shares Rise

FILE - 08 March 2022 - The logo of the Hugo Boss fashion group, taken at an outlet store at the company's headquarters in Metzingen. dpa
FILE - 08 March 2022 - The logo of the Hugo Boss fashion group, taken at an outlet store at the company's headquarters in Metzingen. dpa
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Hugo Boss Reaffirms 2023 Outlook amid Luxury Downturn, Shares Rise

FILE - 08 March 2022 - The logo of the Hugo Boss fashion group, taken at an outlet store at the company's headquarters in Metzingen. dpa
FILE - 08 March 2022 - The logo of the Hugo Boss fashion group, taken at an outlet store at the company's headquarters in Metzingen. dpa

Hugo Boss on Thursday reaffirmed its full-year outlook after posting quarterly results in line with analysts' expectations, supported by strong demand for its products despite a broader downturn in the luxury sector, Reuters reported.
The German fashion house reported a 15% rise in third-quarter sales to 1.03 billion euros ($1.09 billion), spurred by the launch of its fall/winter 2023 collections in August. Analysts had forecast sales of 1.02 billion euros in a poll provided by the company
"Hugo Boss remains one of the few fashion brands still growing in double-digits," Citi analysts said in a note to investors, citing successful product design and diversification and effective marketing among other factors.
Shares were up 4.8% at 0920 GMT. As of Wednesday's close, the stock was 27% off their highest price so far this year, which was reached in July.
The luxury sector, hit by slowing demand for fashion and accessories particularly in the US and Europe, has been further hampered by a slow start to the European fall/winter season amid unusually warm weather.
Hugo Boss, however, had started the fourth quarter strong, CEO Daniel Grieder told reporters in a call.
The company reiterated its annual guidance for sales of 4.10-4.20 billion euros and an operating profit of 400-420 million euros, corresponding to 20%-25% growth.
Its quarterly earnings before interest and taxes (EBIT) rose 12% to 103 million euros, matching analysts' estimate of 102 million euros.

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LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
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LVMH Shares Drop after Missing Second-quarter Estimates

A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights
A man walks past a shop of fashion house Dior in Paris, France, April 15, 2024. REUTERS/Manon Cruz/File Photo Purchase Licensing Rights

Shares in LVMH (LVMH.PA) fell as much as 6.5% in early Wednesday trade and were on track for their biggest one-day drop since October 2023 after second-quarter sales growth at the French luxury goods giant missed analysts' consensus estimate.

The world's biggest luxury group said late Tuesday its quarterly sales rose 1% year on year to 20.98 billion euros ($22.76 billion), undershooting the 21.6 billion expected on average by analysts polled by LSEG.

At 1000 GMT, LVMH's shares were down 4.5%.

The earnings miss weighed on other luxury stocks, with Hermes (HRMS.PA), down around 2% and Kering (PRTP.PA), off 3%.

Kering is scheduled to report second-quarter sales after the market close and Hermes reports on Thursday, Reuters reported.

Jittery investors are looking for evidence that the industry will pick up from a recent slowdown, as inflation-hit shoppers hold off from splashing out on designer fashion.

JPMorgan analyst Chiara Battistini cut full year profit forecasts by 2-3% for the group, citing softer trends at LVMH's fashion and leather goods division, home to Louis Vuitton and Dior.

"The soft print is likely to add to ongoing investors’ concerns on the sector more broadly in our view, confirming that even best-in-class players like LVMH cannot be immune from the challenging backdrop," said Battistini in a note to clients.

The weakness of the yen, which has prompted a flood of Chinese shoppers to Japan seeking bargains on luxury goods, added pressure to margins, another source of concern.

Equita cut 2024 sales estimates for LVMH by 3% - attributing 1% to currency fluctuations - and lowered its second half organic sales estimate to 7% growth from 10% growth previously.

The lack of visibility for the second half beyond the easing of comparative figures - as the Chinese post-pandemic lockdown bounce tapered off a year ago - is unlikely to improve investor sentiment to the luxury sector, Citi analyst Thomas Chauvet said in an email to clients.

"No miracle with the luxury bellwether; sector likely to remain out of favour," he wrote.

Jefferies analysts said the miss came as investors eye Chinese shoppers for their potential to "resume their pre-COVID role as the locomotive of industry growth and debate when Western consumers will have fully digested their COVID overspend".

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20% over the past year, with middle-class shoppers in China, the world's No. 2 economy, a key focus as they rein in purchases at home amid a property slump and job insecurity.

LVMH offered some reassurance, with finance chief Jean-Jacques Guiony telling analysts during a call on Tuesday that Chinese customers were "holding up quite well," while business with US and European customers was "slightly better".