UPDATE 3-Hugo Boss says China shoppers holding back

Tue Jul 31, 2012 11:44am EDT

* Q2 sales 485 mln eur vs poll avg 462 mln

* Q2 core profit 78 mln eur, up 23 pct

* Sees profit up 10-12 pct in 2012

* China sales rise just 1 pct in Q2, US next big driver

* Shares down 5.5 pct, top MDax faller

By Victoria Bryan

FRANKFURT, July 31 (Reuters) - German fashion house Hugo Boss said shoppers in brand-hungry China were postponing or cancelling purchases of luxury items and forecast that the United States could take over from Asia as its biggest driver of growth.

Asian demand for high-end brands has helped shield luxury companies from the worst of the European slowdown, but with China on track for its slowest full year of growth since 1999, there are concerns over luxury sales.

Hugo Boss, known for its sharp suits, said on Tuesday that sales growth in China slowed to just 1 percent in the second quarter, a far cry from the rates of over 10 percent seen by the likes of LVMH, and predicted full-year profit short of analysts' expectations.

"All the major malls in China are seeing a loss of traffic. The consumer is quite insecure," Chief Executive Claus-Dietrich Lahrs told analysts, saying shoppers were being hurt by changes to the availability of credit.

China's growth rate slowed for a sixth successive quarter in the three months through June to 7.6 percent, the slackest pace in more than three years.

Like Burberry, which said earlier this month sales had been hit by a slowdown in China, Hugo Boss said it still believed the Chinese market had huge potential and would invest in new stores as new or refurbished shops had performed better.

"While we are disappointed, we have by no means changed our view on the region's mid-term growth potential," CFO Mark Langer said.

He told Reuters that the United States, where Hugo Boss has recorded consistently good growth rates over the last year, would likely overtake Asia as the biggest driver of growth at the company.

"We don't see any considerable change of business sentiment for us as a brand in this part of the world," CEO Lahrs said.

Shares in Hugo Boss closed down 5.5 percent at 82.03 euros, the top faller on Germany's midcap index.

The group said it expected 2012 core profit to rise by 10-12 percent, disappointing some analysts who had expected rises as high as 15 percent.

Citi analyst Thomas Chauvet said he expected consensus forecasts would come down by around 2-4 percent after Tuesday's statement.

Before the second-quarter results, the average analyst forecast according to Thomson Reuters I/B/E/S had been for profit of 531.7 million euros for 2012, after 469 million in 2011, equivalent to a 13.4 percent increase.

Hugo Boss reported second quarter sales of 485 million euros ($594 million), a rise of 14 percent on a currency-neutral basis, compared with analyst forecasts for 462 million.

Sales rose by 17 percent in Europe, with Germany and the UK strong, by 11 percent in the Americas and just 4 percent in Asia. First-quarter sales in Asia were up 9 percent.

Hugo Boss confirmed a forecast for sales to rise by up to 10 percent in 2012, with growth slowing in the second half as the economy stutters.

It reported second-quarter earnings before interest, tax, depreciation, amortisation and special items (EBITDA) of 78 million euros.

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Comments (1)
gemini1111 wrote:
Hugo Boss is stuck in the 90s. Not nearly the quality as what you can get for half the price. I have owned quite a few of their shirts and they simply do not last. For $200 a pop for the lower end, I would expect a year before fraying. Hell, Banana Republic lasts me 3-4 years for dress shirts and they fit better, too.

Jul 31, 2012 3:21am EDT  --  Report as abuse
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