Hugo Boss shares sink as company becomes latest fashion seller to cut guidance

By Louis Goss

Hugo Boss reported a slump in its second-quarter sales as it warned that a slowdown in the global economy would hit its revenue and earnings in full year 2024

Hugo Boss shares fell sharply on Tuesday after the suit seller followed rivals Burberry and Swatch Group in cutting its guidance over concerns that a slump in the global economy is set to hit sales in key markets including the U.K. and China throughout the remainder of 2024.

The fashion company, headquartered in Metzingen, Germany, said late Monday that "persistent macroeconomic and geopolitical challenges" had led to a slump in demand for its products that would hit its "top- and bottom-line performance" this financial year.

Hugo Boss shares (XE:BOSS), listed on the Frankfurt Stock Exchange, fell 9% on Tuesday, having lost 50% of their value over the previous 12 months.

The company's guidance cut came as it posted worse-than-expected preliminary financial results for the second quarter of 2024 that saw it report a 1% drop in its second-quarter sales, to EUR1.02 billion, and a 42% drop in its earnings before interest and tax, to EUR70 million.

"We are operating in a period of significant global macro uncertainty, which also affected our performance in the second quarter," Hugo Boss CEO Daniel Grieder said in a statement, as the company prepares to publish its full set of second-quarter results on Aug. 1.

The company, which was founded by Hugo Ferdinand Boss in 1924, said it now expects to see its sales grow by 1% to 4%, to EUR4.20 billion to EUR4.35 billion this year, compared with its previous forecasts for 3% to 6% growth, to EUR4.30 billion to EUR4.45 billion.

This is set to see Hugo Boss generate earnings before interest and tax worth EUR350 million to EUR430 million in full year 2024, compared with previous guidance of EUR430 million to EUR475 million and compared with the EUR410 million in EBIT it made in full year 2023.

Hugo Boss's profit warning saw it become the latest fashion brand to warn about the effects of a wider slowdown after its British rival Burberry scrapped its dividend, cut its profit guidance and said it would be replacing its CEO.

Burberry (UK:BRBY) said on Monday that its CEO Jonathan Akeroyd would be stepping down by mutual agreement, to be replaced by former Michael Kors chief executive Joshua Schulman, who will become the British fashion house's fourth CEO in 10 years.

The London company has seen its share price drop 19% since Monday morning, with shares having already fallen by 65% in the previous 12 months.

Swatch Group (CH:UHR) on Monday also said it expects that a slowdown in China will hit its sales this year, as it reported a 14.3% slump in revenue to 3.4 billion Swiss francs ($3.8 billion) in the first half of 2024 , which led to a 70.5% drop in its net income to 147 million Swiss francs over the same period.

"The Group expects the Chinese market (including Hong Kong SAR and Macau SAR) to remain challenging for the entire luxury goods industry until the end of the year," the watch seller said.

Analysts at RBC, led by Manjari Dhar, still believe Hugo Boss "remains well-placed to continue to take share in the premium apparel segment" over the long term, as they said the expansion of its Filderstadt warehouse could help "create meaningful cost efficiencies."

-Louis Goss

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07-16-24 0934ET

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