Hugo Boss earnings disappoint, U.S. market challenging

German fashion house Hugo Boss reported a fall in first-quarter earnings on Thursday due to reorganisation costs, higher marketing expenses and a strong U.S. dollar, while sales fell in a challenging U.S. market.

Hugo Boss said operating profit fell 22 percent to 55 million euros on sales up a currency-adjusted 1 percent to 664 million euros ($743.61 million), missing average analyst forecasts for 65 million euros and 669 million euros respectively.

The company’s shares, which have risen 14 percent so far this year, were indicated to open 2.5 pct lower at 0628 GMT in early trading.

Sales fell a currency-adjusted 8 percent in the Americas, but rose 4 percent in Asia, boosted by double-digit growth in mainland China, which Chief Executive Mark Langer said underlined his confidence for the future.

Known for its smart men’s suits, Hugo Boss has introduced more casual and sportswear styles to appeal to a younger audience and invested heavily in its online offering after a bid to go upmarket backfired a few years ago.

Online sales jumped in the first quarter, up 26 percent, while retail sales rose by 4 percent on a same-store basis, with the renovation of stores of its casual BOSS brand set to drive growth over the course of the year.

Investment in digitalization and reorganization weighed on earnings in the first quarter, but Langer said they should improve efficiency in the rest of the year.

The company said phasing effects related to marketing expenses should also help earnings during the year, while currency effects should ease.

Hugo Boss confirmed its 2019 outlook for a high single-digit percentage increase in operating profit and a mid single-digit percentage rise in currency-adjusted sales.