Hugo Boss Guidance Upgrade Leaves Investors Wanting More

(Bloomberg) — Hugo Boss AG raised its sales and profit guidance again for 2023 after second-quarter sales growth beat estimates as demand surged for its latest mens- and womens-wear collections.

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The German fashion brand now sees full-year sales of €4.1 billion ($4.5 billion) to €4.2 billion, up from a previous forecast of €4 billion, it said Wednesday. Operating profit is expected to grow by 20% to 25%, compared with an earlier outlook of 10% to 20%.

Hugo Boss stock fell as much as 5% initially before paring back some of the losses. The stock had already risen more than 30% so far this year as investor confidence in a turnaround led by Chief Executive Officer Daniel Grieder grows.

The company revamped its Hugo and Boss brands two years ago and has been gaining market share. Expansion in the US and Asia is also fueling growth.

“Younger consumers are buying Hugo Boss and you can see that across the board. All the brands and all the geographies are growing,” said Chief Financial Officer Yves Müller in a Bloomberg TV interview. He said Hugo Boss has a particular “sweet spot” in the US and so far has seen no sign of the pullback by American consumers observed by other retailers.

The company is expanding its range of casual items as well as womenswear, the fastest-growing division.

“Last quarter we were growing 32% in Boss womenswear. This is now the fourth consecutive quarter that Boss womenswear as a business unit is outpacing the others,” said Müller.

A bigger presence in women’s clothing, which currently accounts for less than 10% of revenue, could be a driver of in-store traffic and future sales conversions, according to Bloomberg Intelligence.

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Earlier this year, Hugo Boss intentionally increased inventory to reduce the impact of supply-chain snarls, which had disturbed deliveries during the pandemic. The company will return to a normal level of inventory by the yearend.

Frasers Group Plc, the acquisitive sportswear to department store retailer, is one of the largest shareholders in Hugo Boss and has a wholesale partnership with the German group. Müller said the company had a “great relationship” with Mike Ashley, who founded Frasers, and his son-in-law Michael Murray who now runs the British retailer.

(Updates with CFO comments and shares starting from the fourth paragraph.)

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