Hugo Boss may extend its key sales and profit targets beyond 2025 when it releases its second-quarter results on Thursday, with investors keenly anticipating updates on its trading performance and cost-cutting measures.
Shares of Hugo Boss dropped up to 10% in July following a reduction in its full-year sales and earnings forecasts, attributed to weakening global consumer demand, particularly in China and the UK.
The company had previously indicated in March that its goal of achieving €5 billion ($5.4 billion) in annual revenues by 2025 might be postponed. Despite this, it maintained its expectation of reaching an EBIT margin of at least 12% by next year.
Felix Jonathan Dennl, an analyst at Metzler Capital Markets, noted that in addition to updates on current trading conditions, investors will be closely watching for any revisions to Hugo Boss’s mid-term targets. Dennl and other analysts anticipate that the company may meet its mid-term sales targets two to three years later than initially projected, and achieve its EBIT margin goal post-2028.
“If Hugo Boss fails to provide greater clarity, doubts may persist regarding its revenue and EBIT targets,” warned Alexander Zienkowicz, Senior Analyst at Mwb Research.
Ahead of the preliminary results released in mid-July, analysts had projected 2025 sales of €4.65 billion and an operating profit of €519 million, which would correspond to an EBIT margin of 11%.
Cost management will also be scrutinized, according to Joerg Philipp Frey of Warburg Research. He pointed out that Hugo Boss’s marketing expenditure jumped by 21% in the second quarter compared to the previous year, while retail expenses increased despite a decline in quarterly sales.
In 2023, Hugo Boss has aggressively expanded its footprint by opening 102 new points of sale, including its own stores, “shop-in-shops,” and outlets. This expansion is part of an effort to counteract a slowdown in sales growth, which has contributed to a nearly 50% drop in the company’s share price this year.
“To drive a recovery in share price, Hugo Boss must effectively address its current challenges and present a credible path forward,” said Zienkowicz.
The luxury fashion sector continues to face challenges, with weakened sales and margin pressures as inflation-conscious consumers refrain from purchasing high-end fashion. A property downturn and job insecurity in China have further intensified these issues.
Earnings reports from major luxury brands this quarter, including LVMH and Kering, have underscored the sector’s difficulties, with both companies falling short of expectations.
