Hugo Boss Third Quarter Operating Profit Beats Expectations on Better Cost Control

New Hugo Boss logo and their website shop are seen in this illustration taken, May 17, 2024. (Reuters)
New Hugo Boss logo and their website shop are seen in this illustration taken, May 17, 2024. (Reuters)
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Hugo Boss Third Quarter Operating Profit Beats Expectations on Better Cost Control

New Hugo Boss logo and their website shop are seen in this illustration taken, May 17, 2024. (Reuters)
New Hugo Boss logo and their website shop are seen in this illustration taken, May 17, 2024. (Reuters)

Hugo Boss' third-quarter operating profit slightly beat market expectations on Tuesday, as the company reported a 1% increase in currency-adjusted group sales amid persistently weak demand in China.

Quarterly earnings before interest and tax (EBIT) were down 7% on the year at 95 million euros ($103.3 million), but above analysts' estimate of 90 million euros in a company-provided poll, helped by cost management, it said.

Hugo Boss shares were indicated 2.5% higher in Lang & Schwarz premarket trade.

"Estimates for the coming quarter should be anchored today," analysts at Jefferies wrote in a note to clients, highlighting improved sales in September, better cost control and Hugo Boss' confirmed guidance for the year.

After a 2022 brand revamp boosted its resilience last year, the upmarket fashion label has been grappling with weakening consumer demand despite increasing investment in marketing and production capacity in recent months.

Currency-adjusted sales were 1.029 billion euros during the three months, slightly up from 1.027 billion last year and broadly in line with market expectations of 1.023 billion euros.

"Particularly in China, the overall market environment was affected by persistent subdued consumer demand," the company said in a statement.

Quarterly currency-adjusted sales in its third-biggest market Asia/Pacific fell 7% to 110 million euros, but increased 1% in the Europe, Middle-East and Africa region and 4% in the Americas.

The company said improvements in Germany offset softer sales trends in France and in Britain, while it also saw further sales improvements in the United States.

Hugo Boss, which is taking additional measures to enhance efficiency and effectiveness, especially around sourcing, said it continued to focus on cost control to support profitability into the fourth quarter. It maintained its full-year sales and earnings forecasts after slashing them earlier this year.



Adidas Reports Strongest China Sales Since Early 2022

 Adidas Samba and Gazelle sneakers for sale are seen at a shop in Berlin, Germany, May 2, 2024. (Reuters)
Adidas Samba and Gazelle sneakers for sale are seen at a shop in Berlin, Germany, May 2, 2024. (Reuters)
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Adidas Reports Strongest China Sales Since Early 2022

 Adidas Samba and Gazelle sneakers for sale are seen at a shop in Berlin, Germany, May 2, 2024. (Reuters)
Adidas Samba and Gazelle sneakers for sale are seen at a shop in Berlin, Germany, May 2, 2024. (Reuters)

Adidas saw strong growth in Greater China in the third quarter, while sales in North America excluding Yeezy shoes were up on the year thanks to improving brand image.

Adidas' performance in China contrasts with other companies that are struggling with weak consumer demand and a likely longer wait for government stimulus measures to boost confidence.

Currency-neutral quarterly sales rose 9% to 946 million euros ($1.02 billion) in Greater China, up from 870 million euros a year earlier, the company said on Tuesday - its strongest quarterly sales in China since the start of 2022.

Adidas shares gained 1.7% in early trading, despite a filing announcing top shareholder Groupe Bruxelles Lambert cut its stake. Adidas had already released preliminary figures and hiked its annual sales and profit guidance earlier this month.

A trend for Adidas' "terrace" shoes, retro models inspired by soccer fans' footwear in the 1970s and 80s, has driven sales at the German sportswear company, helping it gain market share over rivals such as Nike and recover from a bruising break-up with rapper Kanye West, who goes by Ye.

"In lifestyle, management is avoiding overflowing the market with Campus and Terrace," said Stifel analyst Cedric Lecasble, adding that Adidas is pushing its SL72 shoes and "low profile" sneakers such as its Taekwondo model.

In North America, Adidas' second-biggest market behind Europe, the Middle East and Africa, currency-neutral sales were down 7% at 1.36 billion euros in the third quarter, but increased from the previous year when excluding Yeezy, the company said.

The results are the latest evidence of a revival in the company's fortunes almost two years after CEO Bjorn Gulden joined the German brand. Gulden has overseen the sales of Adidas' stock of Yeezy shoes left unsold after cutting ties with the rapper, its former design partner.

Adidas' wholesale business - revenue made by selling product through third-party retailers - grew 13% in the third quarter, while direct to consumer sales grew 7%.

The company's gross margin increased by 2 percentage points compared to a year ago, at 51.3% - an impressive result, Jefferies analysts said, given the wholesale channel is generally less profitable.

Adidas has taken shelf space from Nike at multi-brand retailers such as Foot Locker and JD Sports thanks to the trend for its multi-colored sneakers, while its US rival has seen sales fall.