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Berlin / Bloomberg
Hugo Boss AG, the embattled German fashion retailer, reported its biggest drop in quarterly profit in at least six years and said it considers closing stores to reduce costs.
Earnings before interest, taxes, depreciation and amortization and other items declined 29 percent to 93.5 million euros ($108 million) in the first quarter, the Metzingen, Germany-based company said in a statement. That missed the lowest analyst estimate compiled by Bloomberg, which was 95 million euros.
The German fashion label, best known for men’s apparel such as suits and jackets, is struggling with lackluster luxury demand in Asia and discounting in the US that’s led to cuts in its profit outlook and cost former Chief Executive Officer Claus-Dietrich Lahrs his job. The company said it’s considering closing stores with falling sales, and will save an additional 50 million euros this year by renegotiating rents on others while keeping a lid on marketing.
“We could see a much more significant review of retail space,” said Charles Allen, an analyst at Bloomberg Intelligence. “Eight stores closed in the quarter although openings still outpaced this.”
First-quarter sales in the US tumbled 16 percent adjusted for currency effects, while Chinese sales were down 11 percent. In Europe, revenue fell 2 percent on a slow tourist trade, especially in France and Belgium, Boss said.
The shares rose 0.2 percent in Frankfurt. They’ve lost half their value in the past year.
Adding to the management turmoil, the company replaced brand chief ChristophAuhagen last month with company veteran Ingo Wilts, who will rejoin Boss as chief brand officer from Tommy Hilfiger by Nov. 1.
“Without any form of concrete leadership or strategy in place, one could clearly surmise the stock is un-investible at this point,†wrote John Guy, an analyst at MainFirst Bank. “We have sympathy with this view. However, it also paves the way for fresh, radical thinking about future brand strategy and positioning.â€
Boss reiterated its forecast for a low single-digit percentage increase in currency-adjusted sales this year and a low double-digit decline in Ebitda. Gross margin is expected to be unchanged from last year’s level.
Boss is caught in a “negative spiral” of department stores cutting prices on its goods to attract customers amid a luxury slowdown, said Cedric Rossi, an analyst at Bryan Garnier& Co. in Paris.