Business

Hugo Boss predicts profits to stabilise after 41% fall

German fashion group slashes dividend as sales down 4% in 2016 to €2.69bn

Hugo Boss proposed a dividend of €2.60 per share, down 28 per cent from a year earlier. Photograph: Krisztian Bocsi/Bloomberg

Thu Mar 9 2017 - 20:32

Hugo Boss said that its sales and earnings should stabilise in 2017, as the German fashion group slashed its dividend and seeks to recover from falling profits and the departure of its chief executive.

A profit warning in February prompted first a sharp sell-off in Boss’s shares and then the resignation of chief executive Claus-Dietrich Lahrs.

Overall sales fell 4 per cent in 2016 to €2.69 billion, while operating profit was down 41 per cent year on year at €263.5 million. The group proposed a dividend of €2.60 per share, down 28 per cent from a year earlier.

Mr Lahrs was succeeded in May by chief financial officer, Mark Langer, who revamped the group’s strategy. He decided to largely abandon Boss’s efforts to break into the luxury segment and refocus on its core suits business. He also announced plans to close underperforming stores and simplify the brand structure.

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Right track

Mr Langer conceded on Thursday that 2016 had not been “an easy year” but said that he was convinced that the company was now back on the right track.

“The realignment is beginning to take effect and the first results are becoming visible. In particular, we managed to turn around our business in China,” he said. “I am very confident that Hugo Boss will return to sustainable and profitable growth after this phase of stabilisation.”

Boss now expects sales to be “largely stable on a currency-adjusted basis” in 2017, with revenues staying flat in Europe, rising slightly in Asia thanks to growth in China, and falling slightly in the Americas. It forecast that earnings before interest, tax, depreciation, amortisation and special items should be within 3 per cent of last year’s figure of €493.1 million.

Push ahead

Mr Langer said that the company would push ahead with the plans he announced last autumn to reduce its four brands to two, and overhaul its distribution network and expanding online sales.

Luca Solca, an analyst at Exane BNP Paribas, said that the 2016 results and the 2017 forecast were in line with analysts’ expectations, and reiterated his “neutral” recommendation on the stock. “Hugo Boss is still cheap, but its growth prospects are hampered by its being a traditional company in a mature category,” he said.

Shares in the group rose 1 per cent and were €67.50 in afternoon trading in Frankfurt.

– (Copyright The Financial Times Limited 2017)

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