Exchange Rate And China'S Market In Trouble Hugo Boss Third Quarter Profit Slump

The latest news from Berlin was affected by the difficulties in the exchange rate and the Chinese market. By the end of September 30th, the net profit of the German fashion retail giant Hugo Boss declined 23% to 85 million 500 thousand euros (US $98 million 400 thousand) in the third quarter, and the profit before depreciation and amortization (EBITD) fell 13% to 132 million 600 thousand euros (US $147 million 500 thousand).

Areas with severe falls include the Americas and the Chinese market. Sales in the Americas fell by 7%, and sales in the US region plummeted by 10%.

Sales in the Asia Pacific region dropped by 12%, and the decline in China also reached double digits. The group thought that the situation of the fashion retailing industry is deteriorating rapidly, and the weak tourism demand has further exacerbated the decline in performance.

Compared with other luxury brands, HUGO BOSS has two distinct characteristics: first, China's market share is small; the two is the wholesale business.

In the layout of other luxury brands, the market share of the Chinese market is mostly occupied by the first two, accounting for nearly half of the total sales. Therefore, China has become the preferred gold nuggets.

But HUGO BOSS is quite different. China's market share is far lower than that of the European and American markets, and its performance has not been ideal.

The slump in the Chinese market has completely reversed the ambitious expansion plan of HUGO BOSS before returning to the cruel reality.

Hugo Boss group, CEO Claus-Dietrich Lahrs, said at a meeting of investors that the Chinese market will not be able to resume double-digit growth in the next few years.

There will be difficulties.

According to earlier reports, last month, Hugo Boss lowered its annual sales forecast for Asia and the Americas. Hugo Boss's third quarter sales volume was 744 million euros (827 million US dollars). Sales in the euro area rose 4%, while the exchange rate rose by only 1% on the basis of the adjusted exchange rate.

According to group statistics, sales in Europe accounted for 60% of total sales in the third quarter, but sales increased by only 4% on the basis of the adjusted exchange rate, but sales in the UK area increased by double digits.

In the third quarter, the group's retail business grew by 6%, thanks to the development of Internet sales, but the wholesale business dropped by 7%.

The wholesale channel was flat at 815 million euros ($910 million), reflecting the weakness of wholesale and supplementary businesses in the third quarter.

Hugo Boss group said the men's wear sales fell by 1% according to the local exchange rate.

Sales rose 1%, while women's clothing sales, designed by Jason Wu, rose 6%.

Industry analysts say that the Hugo Boss group's escalating stores and the expansion of its retail network mean higher operating costs and more capital needed to improve retail services and promote marketing.

Excluding special items, profits before tax depreciation and amortization (EBITDA) fell by 8% to 168 million euros ($186 million), and the adjusted operating margin decreased by 280 basis points to 22.6%.

In the first three quarters of 2015, Hugo Boss group's net profit fell 9% to 234 million euros (261 million US dollars); pre tax profit (EBIT) fell 4% to 328 million euros ($367 million); after excluding special items, the depreciation and amortization profit (EBITDA) was flat at 422 million euros (471 million US dollars).

Group sales rose 9% to 2 billion 60 million euros ($2 billion 300 million).

Rapid growth has been the highlight of this earnings report. Online retail sales rose 16% to 1 billion 200 million euros ($1 billion 340 million) in the first 9 months of Hugo Boss.

In terms of physical shops, Hugo Boss opened 64 stores in the first three quarters, and now owns 1105 stores.

Hugo Boss group has said that it will strive to improve the steady growth of sales, taking into account the sharp slowdown in China's economy and the weakness in the US region.

The Group expects sales to rise in October, and the fourth quarter's performance outlook is positive.

Hugo Boss's performance in the third quarter was disappointing, and its share price fell by nearly 10% last Friday.

Affected by the deterioration of the Asian market and the adverse effects of the US economic slowdown, Hugo Boss10 released its third quarter performance warning in the middle of the month. The group announced its cuts in 2015 sales and earnings forecasts, with a projected annual sales growth of 3%-5%, and the pre tax profit from the expected growth of 5%-7% to 3%-5%.