Hugo Boss sees chance of returning to profit growth

Bloomberg

Hugo Boss AG, the ailing German clothier, said earnings may rise in 2017 as its turnaround takes shape after profit plummeted on weak sales in China and the US last year.
Adjusted operating profit will rise or fall as much as 3 percent this year, the company said in a statement on Thursday. The company said it’s cutting its dividend to 2.60 euros a share, compared with a Bloomberg forecast for 2.65 euros.
After years of struggle, Hugo Boss is seeking to revive under the leadership of Mark Langer, the former finance chief who was promoted to 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 apparel online.
“The good news today is that there is no negative surprise,” analyst Joerg Philipp Frey of Warburg Research said. “Boss is returning to stability.” The shares were almost unchanged at 66.69 euros at 9:05 a.m. in Frankfurt.
Adjusted operating profit fell 17 percent last year, in line with the company’s January statement that the profit decline was at the better end of its forecast range, which was for a decline of 17 percent to 23 percent. That was helped by “cost discipline and rigorous discount management,” the company said.
The company, whose focus has long been menswear, is reintroducing lower-priced products for retail stores under the less expensive Hugo brand and moving away from luxury products and womenswear. The company is also closing unprofitable stores after doubling its shop network between 2010 and 2015.
Revenue last year declined about 4 percent to 2.69 billion euros ($2.83 billion), Hugo Boss said in January. Sales will remain roughly stable this year on a currency-neutral basis, the company said. Marketing expenses as a proportion of sales will rise “slightly” this year, while capital expenditures will remain about stable, after the company spent about 50 million euros less than planned last year.
The results will ease concerns about the company’s guidance, Berenberg analysts Zuzanna Pusz and Mariana Horn said in a note, adding that “2017 will be a crucial year for Hugo Boss as the company will need to deliver the execution of its new menswear and premium market-focused strategy.”