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Hugo Boss says Q4 sales indicate it’s heading in the right direction

January 17, 2017 04:00 PM
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(Bloomberg)—Hugo Boss AG shares climbed the most in almost five years after the German clothier said 2016 operating profit was at the upper end of its forecast range, providing a boost for a company mired in falling sales and earnings.

The stock rose as much as 9.7% Monday to 60.33 euros ($64.61), the steepest intraday gain since March 14, 2012. The update means an anticipated decline in full-year operating profit will be nearer 17% than 23%, a range set by the company in August.

After years of struggle, Hugo Boss, No. 308 in the Internet Retailer 2016 Top 1000, is seeking to revive under the leadership of Mark Langer, the former finance director who was promoted to the role of CEO in May. In November, Langer said the company won’t return to growth until 2018 as it eliminates brands, slows down store expansion and sells more online. Claus-Dietrich Lahrs had resigned as CEO in February last year after the German fashion retailer cut its profit outlook for the second time in six months.

“While we think Hugo Boss is taking steps in the right direction, we think its new strategy will unlikely yield profit growth until 2018 at the earliest,” Claire Huff, an analyst at RBC Capital Markets, said in a note. “Reintroducing entry price products into retail stores under the Hugo brand should be helpful for volumes, however we still believe that Boss faces a number of structural challenges in regard to its overall brand and price positioning.”

The company said full-year sales were about 2.69 billion euros ($2.85 billion), down about 4% on 2015, or 2% on a currency-adjusted basis. For the fourth quarter, the respective declines were about 1% and 3%. Hugo Boss did not break out online sales. In 2015, e-commerce sales were an Internet Retailer-estimated $75.8 million, up 5% from $72.2 million.

“Fourth-quarter results underline that we are on the right way,” Langer said in the statement. “In China, we completed the turnaround in the second half of the year. In Europe, we held up well in a difficult market environment.”

The final 2016 numbers and an outlook will be published March 9.

 

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