- Prachi Singh |
Currency-adjusted sales at Hugo Boss AG grew by 3 percent in fiscal year 2017 driven essentially by sales in the group’s own retail business, which the company said, outperformed expectations. Sales in the reporting currency totalled 2,733 million euros (3,390 million dollars), an increase of 1percent on the previous year. Hugo Boss said, with 491 million euros (609 million dollars), operating profit remained on prior year level. The company added that increase in sales was offset by investments in repositioning the Boss and Hugo brands and the digital transformation of the business model and the strong euro also acted as a major drag on the operating profit.
“We achieved what we set out to do in 2017,” said Mark Langer, CEO of Hugo Boss in a media statement, adding, “This year, we want to step up the pace of growth. The new Boss and Hugo collections are well received by the market. Feedback from the Boss menswear and Boss womenswear presentations in New York was also very positive. Our strategic realignment is taking effect. Thus we are on the right track towards sustainable and profitable growth.”
Review of Hugo Boss’s annual financial results
The company said, all regions contributed with currency-adjusted sales growth. Sales in Europe increased by 2 percent, in particular due to stronger local demand and a recovery in business with tourists. In the Americas, sales in local currencies grew by 1 percent, while growth in Canada and Latin America compensated for slight declines in the United States. Sales in the Asia/Pacific region benefited from the upturn in the Chinese market, growing 6 percent after adjusting for currency effects.
Sales in the group’s own retail business rose by 5 percent in local currencies and all sales formats saw mid to high single-digit growth. Comp store sales were 3 percent above the previous year’s level after adjustment for currency effects, wholesale, on the other hand, recorded a currency-adjusted decrease in sales of 2 percent, due in part to more selective distribution in the US market and some takeovers of shop-in-shops. Sales from the license business were up 14 percent, due primarily to increased license income from fragrances.
Adjusted for currency effects, Boss and Hugo achieved sales growth of 3 percent and 5 percent respectively. The company said, Boss brand benefited particularly from double-digit increases in the athleisure offering while the Hugo brand reported double-digit growth in casualwear.
The company witnessed rise in the gross profit to 1,808 million euros (2,242.8 million dollars) and gross profit margin increased due to the increased share of sales in the group’s own retail business, however negative translation effects in connection with the appreciation of the euro, offset the increase to some extent. Net income in fiscal year 2017 still grew by 19 percent to 231 million euros (286.5 million dollars), while EBITDA before special items at 491 million euros (609 million dollars) remained stable.
The number of the Group’s own freestanding retail stores declined by three in the 2017 to 439.
Hugo Boss expects further sales growth in FY18
Hugo Boss expects sales growth to accelerate in 2018, with an increase in the low to mid single-digit range after currency adjustments. In euro terms, growth is projected to be lower due to negative currency effects. All regions are expected to contribute. The company expects an increase in its retail business in the mid single-digit range, with the wholesale business returning to growth. The change in the operating result (EBITDA before special items) in 2018 is expected to lie in the range of negative 2 percent to 2 percent compared with the prior year.
The company added that in Europe, sales will increase by a percentage rate in the low to mid single digits adjusted for currency effects. For the Americas region, 2018 is predicted to see the upward trend continue. As a result of this, sales should increase by a low single-digit percentage rate when adjusted for currency effects. In Asia, sales are forecast to grow by a mid to high single-digit percentage rate adjusted for currency effects, particularly due to an unchanged positive outlook in the Chinese market.
Hugo Boss expects the gross profit margin to remain largely stable in 2018 compared to the prior year, based on the assumption that positive effects from the growing share in sales of the group’s own retail business and a moderate reduction in discounts will be offset by investments in the value proposition of Boss and Hugo as well as negative currency effects. The company said, sources of growth will be the ongoing improvement in the website, the renovation of around 150 retail spaces with a new store concept, the opening of Hugo stores in selected European major cities and additional personalized and digital services.
The company’s managing and supervisory boards intend to propose a 5 cent increase in dividend for the 2017 financial year to 2.65 dollars per share at the annual shareholders’ meeting.