Hugo Boss jumps as clothier’s profit guidance brings relief

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 percent to 60.33 euros, the steepest intraday gain since March 14, 2012 and the biggest advance in the MDAX Index of mid-cap shares.
The update means an anticipated decline in full-year operating profit will be nearer 17 percent than 23 percent, a range set by the company in August. After years of struggle, Hugo Boss is seeking to revive under the leadership of Mark Langer, the former finance director who was promoted to the role of chief executive officer 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.
“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 percent on 2015, or 2 percent on a currency-adjusted basis. For the fourth quarter, the respective declines were about 1 percent and 3 percent.
“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 on March 9.