Hugo Boss shares closed 7% lower after the German fashion firm flagged weaker demand in China and concern about US consumer sentiment ahead of the US presidential election.
The German fashion house is on an expansion mission, increasing marketing spend and opening 102 new outlets last year, but its shares have fallen this year as it warned of slower sales growth.
In the Americas region, Hugo Boss’s first-quarter sales were up 11% compared to the same quarter last year, but were slowing compared with a growth of 18% in the previous quarter.
Demand in key markets such as China and Britain has continued to deteriorate, while the US consumer may also be impacted by uncertainties such as the upcoming presidential election, chief financial officer Yves Mueller said.
Investors may be worried investments the fashion house has been making are not supported by strong growth anymore, putting pressure on profit margins, said Jelena Sokolova, an analyst at Morningstar.
Hugo Boss had warned in March its target of reaching €5bn in annual revenues in 2025, with the Asia-Pacific and Americas regions each delivering €1bn, might be delayed.
In the first quarter, usually a slower period for retailers, overall sales were €1bn, up 6% from a year ago. The German fashion house posted a 6% rise in first-quarter earnings before interest and taxes to €69m, edging the €65m expected by analysts.
Sales in China fell from the same period a year earlier, though, due to “muted” demand. Hugo Boss still aims to increase the Greater China region’s contribution to group sales, which now stands around 8%, Mr Mueller said.
“We think that the sales mix and the source of the beat are not the best of quality,” JP Morgan analysts wrote in a note to clients.
