(Reuters) -Shares in Hugo Boss slumped nearly 10% on Thursday, hitting their lowest level since 2022 after the premium apparel brand flagged weaker demand in China and concern about U.S. consumer sentiment ahead of the presidential election.
The German fashion house is on an expansion mission, increasing marketing spend and opening 102 new points of sale in 2023, but its shares have fallen this year as it warned of slower sales growth.
In the Americas region, Hugo Boss first-quarter sales were up 11% compared to the same quarter last year, but 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 U.S. consumer may also be impacted by uncertainties such as the upcoming presidential election, Chief Financial Officer Yves Mueller said.
Hugo Boss shares were 8% down at 46.57 euros by 1124 GMT, bringing losses so far this year to around 30%. The stock had gained earlier after the company reported better than expected first-quarter operating profit.
Investors may be worried investments Hugo Boss 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 5 billion euros in annual revenues in 2025, with the Asia-Pacific and Americas regions each delivering 1 billion euros, might be delayed. In the first quarter, usually a slower period for retailers, overall sales were 1.014 billion euros, up 6% from a year ago.
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%, Mueller said.
The German fashion house posted a 6% rise in first-quarter earnings before interest and taxes to 69 million euros ($74 million), edging the 65 million expected by analysts.
“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.
($1 = 0.9335 euros)
Source: Economy - investing.com
