Hugo Boss Returns To Profit Even as Sales Slow

BERLIN, Germany — German fashion house Hugo Boss said on Tuesday it was focused on driving a recovery of its business online and in China and tapping into the trend for more casual fashion that has been accelerated by the coronavirus pandemic.

"We have a lot more to offer than the classical suit," acting Chief Executive Yves Mueller told journalists, noting that customers were increasingly mixing formal and casual items, such as wearing a suit jacket with a T-shirt and sneakers.

After slumping to a loss in the second quarter, Hugo Boss swung back to a third-quarter operating profit of €15 million ($17.52 million). That was slightly ahead of average analyst forecasts, even though revenue fell by a currency-adjusted 24 percent to €533 million, missing a consensus for €553 million.

Mueller said casualwear is more profitable than the company's core business of selling smart men's suits.

Hugo Boss shares were the biggest gainer on the German mid-cap index, rising 6.35 percent by 09.35 am GMT.

Online sales jumped 66 percent in the third quarter, as Hugo Boss launched e-commerce in 24 more markets, with another 12 countries to be added in 2021. Mueller said the company was on track to meet its target for €400 million of online sales by 2024.

He declined to give a full-year outlook as parts of Europe close stores again during new lockdowns to stem the spread of the coronavirus. However, he was upbeat about e-commerce and China, where he said business was excellent in October.

Third-quarter sales in mainland China rose 27 percent from a year earlier. China currently accounts for about 7 percent of group sales, less than many rivals.

"That is why we want to go full speed ahead," Mueller said.

Hugo Boss showcased sportier and younger styles with a livestreamed show during Milan fashion week in September, also heavily promoted in China, while many limited-edition casualwear items co-designed with British boxer Anthony Joshua sold out.

However, Harry Barnick, analyst at research company Third Bridge, sounded a note of caution: "There is a risk that the casualisation strategy alienates the existing customer base if execution is poor."

By Emma Thomasson; editors: Thomas Seythal, Maria Sheahan and Susan Fenton.