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Jul 31, 2014
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Hugo Boss sales growth boosted by running own stores

By
Reuters
Published
Jul 31, 2014

BERLIN, Germany - German fashion house Hugo Boss on Thursday reported second-quarter sales rose 5 percent, helped by its strategy of running more of its own stores.


It confirmed its full-year targets.

Net profit rose 20 percent to 62.5 million euros ($83.7 million) while sales grew 5 percent to 558.9 million, compared with average analyst forecasts of 61.4 million euros and 568 million euros, respectively.

Best known for its men's suits, Hugo Boss is banking on investment in womenswear to drive future growth. It reiterated a 2014 forecast for a high single-digit percentage rise in currency-adjusted sales and operating earnings.

"Despite the persistently difficult environment in some key markets, we will grow even faster in the second half of the year, particularly in terms of earnings," Chief Executive Claus-Dietrich Lahrs said in a statement.

Hugo Boss shares were up 4 percent at 1104 GMT, compared with a 1.4 percent fall in the German mid-cap index.

"Hugo Boss remains one of the best earnings growth stories in the luxury sector this year, underpinned by a strong balance sheet and generous dividend yield," Citi analysts, who rate the stock a "buy", said in a note.

Currency-neutral sales in the group's own retail business rose by 17 percent, while wholesale revenues fell 6 percent although Hugo Boss said it expected the wholesale channel to perform much better in the second half of the year.

It saw revenue grow 10 percent in Europe, where it makes more than half its sales, while the Americas recovered to rise 7 percent. Asian growth stayed slow at 2 percent, dampened by China's slowing economy coupled with a crackdown on bribery.

Hugo Boss said fast growth of own retail as well as lower markdowns helped gross profit margin rise 150 basis points to 66.7 percent. Hugo Boss plans to add around 50 new stores this year to the 1,000 it already runs.

$1 = 0.7464 Euros

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