People walk past German luxury fashion store Hugo Boss at Shenzhen Bao’an International Airport.
Alex Tai Image SOPA | Light Rocket | Getty Images)
Hugo Boss Shares plunged as much as 10% Tuesday after the company cut its sales outlook, becoming the latest high-end fashion line to warn of persistent woes in the luxury sector.
The German fashion house said it expects full-year sales of 4.35 billion euros ($4.73 billion), down slightly from its previous forecast of 4.45 billion euros.
The company attributed the revised outlook to “ongoing macroeconomic and geopolitical challenges” and cited China and the UK as the most challenging markets.
Shares pared losses slightly to trade down 8.8% at 9:53 am London time.
“We are operating in a period of significant global macro uncertainty, which also impacted our performance in the second quarter,” CEO Daniel Grieder said in a statement.
“Although the timing of the macro recovery is still uncertain, our strategy of continuously investing in our strong brands, BOSS and HUGO, gives us confidence in our ability to continue to drive top-line growth and gain more market share,” he said.
The guidance cut is the company’s second so far this year, after the retailer said in March that 2024 sales growth would likely slow to 3% to 6%. The revision was moderate which targets more for 1% to 4% growth in the group currency.
Hugo Boss group sales fell 1% on a preliminary basis in the second quarter to 1.02 billion euros, driven mainly by declines in Asia and Europe, it said on Monday.
Second-quarter operating profit fell 42% year-on-year to 70 million euros, reflecting “softer sales trends and strategic investments into the business,” the company said in a preliminary report.
Grieder said he expects the company to turn a profit in the second half of the year.
The adjusted outlook due to macroeconomic and geopolitical concerns has weighed on the luxury sector more broadly, with other high-end brands including Burberry and LVMH reporting sales declines.
Burberry shares tumbled 16% on Friday after disappointing first-quarter fiscal performance led to the issuance of a profit warning, a CEO change and a dividend ax. The company was trading 1.3% lower at 9:50 am London time.
Swiss luxury group Richemont on Monday reported just 1% sales growth at constant exchange rates in the first quarter as a decline in Chinese sales weighed on the company’s results.
Weaker demand from the already lucrative Chinese market has been a telegraphic strain in the luxury sector for several quarters now, as the world’s second-largest economy struggles to emerge from the pandemic.
Swetha Ramachandran, global equity fund manager at Artemis Fund Managers, told CNBC that the slowdown in Chinese consumer spending may be overstated, however, with many Chinese shoppers once again making big-ticket purchases overseas.
“Before the pandemic, about 70% of luxury demand by Chinese consumers used to be made outside of mainland China. With the lockdown, no one can travel, everything will go back to mainland China,” he told CNBC’s “Europe’s Squawk Box” on Tuesday.
“Now that people have moved again, this is again going back abroad, which explains some of the strength in other Asian destinations, which are the priorities of Chinese tourists today,” he added, noting that Japan has proven to be particularly popular for internationals. Purchases are given if they are weak.
