Hugo Boss has record year, expects strong 2023, but stellar growth will slow
Hugo Boss announced its annual results on Thursday and spoke of a “record year”, although it also said 2023 growth will slow. That’s despite sales in Asia Pacific accelerating and the German fashion giant also saying that its business strategy (dubbed ‘CLAIM 5’) is paving the way for future top- and bottom-line growth.
The company has reinvented its Hugo and Boss brands in recent periods and this appears to have paid off with currency-adjusted group sales, rising 27% to a record level of €3.651 billion (it was the first time it topped the €3 billion).
It said it saw broad-based growth across those two brands, as well as in all regions and all consumer touchpoints.
Profit on an EBIT basis, rose 47% to €335 million, "driven by strong top line momentum”. The EBIT margin was up 100 basis points at 9.2%, largely reflecting operating expense leverage in physical retail. Net profit was up 54% at €222 million.
The group’s gross margin remained stable at 61.8%, as the overall higher share of full-price sales compensated for “negative external effects caused by elevated sourcing costs and unfavorable currency effects”.
The overall strength in 2022 was supported by a “stellar performance” in Q4. This helped the group beat its full-year sales and earnings targets that had been revised upwards twice during the year.
That was despite “high levels of macroeconomic and geopolitical uncertainty in fiscal year 2022, including global supply chain disruptions, the economic implications of the war in Ukraine, and long-lasting pandemic-related restrictions in China”.
Across brands, both Boss Menswear and Womenswear, as well as Hugo, recorded significant double-digit sales improvements. It saw strong sell-through rates, enabling both brands to successfully expand market shares globally. Currency-adjusted sales for Boss Menswear and Boss Womenswear grew 27% and 21%, respectively, while Hugo posted growth of 27%.
The company added that momentum was particularly strong in EMEA and in the Americas, “fuelled by robust consumer sentiment”. The currency-adjusted sales growth of 32% year on year was spurred by double-digit revenue improvements in the UK, France, and Germany, as well as a particularly strong performance in the Middle East. In the Americas, currency-adjusted revenues were up 29%. Sales in Asia Pacific increased by 6% currency-adjusted, as strong double-digit improvements in South East Asia & Pacific were partly offset by sales declines in mainland China due to Covid restrictions.
GROWTH TO SLOW
As for this year, group sales are expected to rise by a more muted mid-single-digit percentage and EBIT should be up between 5% and 12% in a range of €350 million to €375 million.
That's perhaps no surprise as post-pandemic growth could hardly continue at the ultra-fast rate it has been seeing. But there’s no denying that the outlook it has offered for this year is one that many businesses would envy, especially after such a powerful 2022 performance.
“2022 was an outstanding year for Hugo Boss,” said CEO Daniel Grieder. “Thanks to the rigorous execution of our CLAIM 5 strategy, we made [it] a record year. Most importantly, our bold branding refresh impressively fuelled brand power of Boss and Hugo. In achieving this, we have laid a strong foundation to further leverage [their] great potential going forward.”
The company said fiscal 2022 was “an important milestone” for the business. It made “significant progress" across key areas, including brand, product, and sales. And the “new and powerful brand images” of Boss and Hugo “drove momentum throughout the year, resulting in strong full-price sales and enabling both brands to successfully expand market shares around the globe”.
As for that EBIT profit figure, the 47% increase came despite significant investments into the business, such as a 41% rise in marketing spend. But the “robust” top-line performance meant the investment spend was more than compensated for during the period.
The company will continue to invest heavily this year in line with its vision of being "the leading premium, tech-driven fashion platform worldwide". That means it will push ahead with further digitalisation of the business model.
It said that by “fully leveraging the power of data, the company will reduce collection complexity and further enhance operational efficiency”. And it will “link digital and physical commerce even more closely to offer its customers a best-in-class omnichannel experience”.
The recent relaunch of the “strongly improved” Hugo Boss app, "significantly enhancing the mobile shopping experience,” plays an important role here.
But physical shopping won’t be neglected and the ongoing modernisation of the global store network continues to drive store productivity. This has included the recent reopening of Boss on London’s Regent Street, and the planned renovation of the brand’s store at Dubai Mall later this year.
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