On July 15 local time, the German fashion luxury group HUGO BOSS released its preliminary results for the second quarter and updated its full-year performance outlook for 2024.
Due to the challenging macroeconomic and geopolitical environment, global consumer demand is under pressure, particularly in key markets such as the UK and the Chinese Mainland. Therefore, the Group’s sales decreased by 1% to EUR 1.015 billion after currency adjustments (Q2 2023: EUR 1.026 billion).
However, HUGO BOSS’s revenue in the second quarter continued to significantly exceed pre-pandemic levels in 2019, with an increase of over 50%. This reflects the successful implementation of the “CLAIM 5” growth strategy over the past three years, which has significantly enhanced the brand’s momentum and led to substantial market share growth for both BOSS and HUGO.
*Note: In 2021, HUGO BOSS Group launched the “CLAIM 5” global growth strategy plan, which includes brand elevation, product excellence, digital leadership, rebalancing omnichannel, and organized growth. This strategy aims to accelerate growth across all brands, touchpoints, and regions, including a brand refresh to rejuvenate and elevate the relevance of BOSS and HUGO. At that time, the Group announced significant investments in products, brands, and digital areas to attract younger consumers, with a goal of restoring the EBIT margin to around 12% by 2025.
Meanwhile, operating profit (EBIT) for the second quarter is estimated at EUR 70 million (Q2 2023: EUR 121 million). Besides the overall weak sales trend, additional marketing investments (up 21% to EUR 82 million) and higher physical retail costs (up 12% to EUR 238 million) also contributed to the decline in EBIT. These factors were partly offset by a strong improvement in the gross margin for the second quarter (+50 basis points to 62.9%; Q2 2023: 62.3%), as HUGO BOSS continued to successfully enhance the efficiency of its global procurement activities.
From a balance sheet perspective, HUGO BOSS Group’s cash position further improved, with free cash flow reaching EUR 143 million in the second quarter (Q2 2023: EUR 60 million). This development mainly reflects further optimization of inventory levels, with inventory decreasing by 7% under continuous stringent inventory management, improving the percentage of inventory to Group sales to 24.9%, down 340 basis points from the same period last year (June 30, 2023: 28.3%). At the same time, capital expenditure increased by 14% over three months, totaling EUR 76 million (Q2 2023: EUR 66 million).
As of the close of trading on July 15, HUGO BOSS Group’s share price fell by 2.91% compared to the previous trading day to EUR 40.37 per share, with a latest market value of EUR 2.578 billion. Over the past 12 months, HUGO BOSS Group’s share price has cumulatively declined by 44.73%.
By market, although HUGO BOSS Group continued to maintain growth momentum in the Americas (+5%), the Group’s revenue in the second quarter slightly declined in the EMEA region (-2%) and the Asia-Pacific region (-4%).
By channel, HUGO BOSS Group also maintained momentum in physical wholesale business in the second quarter (+5%). Despite robust growth in hugoboss.com, the Group’s digital business (-4%) revenue was below last year’s level. In addition, physical retail revenue also slightly decreased (-2%), reflecting reduced store traffic.
Overall weakened consumer confidence also affected the performance of various brands. Specifically, by brand, BOSS Menswear’s revenue, adjusted for currency, was still 2% lower than the same period last year, while BOSS Womenswear’s sales grew by 2%. HUGO brand’s revenue, adjusted for currency, grew by 3%, benefiting from the successful launch of the new brand series HUGO BLUE, focusing on denim products.
Looking ahead to the full year of 2024, HUGO BOSS Group updated its financial outlook for 2024, expecting annual sales to be around EUR 4.2 billion to EUR 4.35 billion; EBIT to be between EUR 350 million and EUR 430 million (15% to 5% growth).
Regarding this, HUGO BOSS CEO Daniel Grieder summarized: “We are in a period of significant global macroeconomic uncertainty, which also impacted our second-quarter performance. Although the timing of macroeconomic recovery remains uncertain, our continued investment in the strong brands BOSS and HUGO gives us confidence to continue achieving growth above the trend and further capturing market share. By translating this sales performance and focusing more on operational efficiency, we have the capability to resume profit growth in the second half of the year. By continuing to implement our ‘CLAIM 5’ strategy, we are committed to creating substantial value for shareholders.”
HUGO BOSS Group will release its complete second-quarter results on August 1, 2024. On that day, the company will also hold a conference call, including a webcast for financial analysts and investors.
｜Source: HUGO BOSS Group official website and original financial report, Luxe.CO historical coverage
｜Image Credit: HUGO BOSS Group official website
｜Editor: Wang Jiaqi
