UPDATE 2-Hugo Boss eyes stronger growth in 2014 as new stores drive sales

Fri Feb 7, 2014 10:41am EST

* Q4 adj EBITDA 157 mln eur vs poll avg 158 mln
    * Q4 sales 649 mln eur vs poll avg 663 mln
    * CFO expects faster growth in 2014
    * Shares down 1.7 pct


    By Victoria Bryan
    FRANKFURT, Feb 7 (Reuters) - German fashion house Hugo Boss
 said it was confident of stronger growth this year as
it continues to open more of its own stores, its new womenswear
designer launches his first collection, and as the recovery in
Europe takes hold.
    "We are seeing enough signs that we can grow faster in 2014
than we did in 2013," Chief Financial Officer Mark Langer told
Reuters after the group reported a 6 percent rise in 2013 sales
on Friday.
    Hugo Boss expects sales from its own stores will rise by
over 10 percent in 2014, while wholesale revenues will be flat,
Langer said. 
    The group, known for its men's suits, has been moving away
from selling through partners to running its own stores, where
it has more control of how goods are displayed and what price
they are sold at, helping to improve its margins.
    In a bid to shake up its womenswear business, which it has
struggled to expand as fast as originally hoped, it has hired
Jason Wu, a U.S.-based designer whose dresses have been worn by
First Lady Michelle Obama and actresses Reese Witherspoon and
Diane Kruger.
    The investment in its own stores, with a further 50 planned
this year, and marketing around Wu, plus slower luxury spending
in China, means Hugo Boss last year postponed its 2015 target to
reach a 25 percent margin  - core profit as a percentage of
sales.    
    "We are concerned that growth will again be held back this
year by additional brand investments," Commerzbank analyst
Andreas Riemann said in a note.
    Langer said the group would still be improving margins over
the next couple of years, only more slowly than expected.
    Shares dropped 1.7 percent on Friday, as sales in the fourth
quarter came in slightly below expectations after growth slowed
in the United States and China remained subdued. Europe, which
makes up 60 percent of sales, developed very positively, Langer
said.
    Hugo Boss reported fourth-quarter adjusted earnings before
interest, tax, depreciation and amortisation (EBITDA) of 157
million euros ($213.5 million) on sales of 649 million euros. 
    For 2013, sales rose 6 percent to 2.43 billion euros, at the
low end of its target range of 6-8 percent for both sales and
profit. EBITDA increased 7 percent to 565 million euros and
Langer said this means an increased dividend is likely.
 
    Langer also said Hugo Boss still viewed emerging markets as
a good source of growth, despite the recent devaluation of
currencies in countries like Turkey and Brazil affecting how
much it costs to operate there. 
    "Emerging markets make up only 16 percent of our sales. We
see a very attractive and profitable opportunity to grow in
countries like Brazil, Turkey or Russia."
    Hugo Boss will release full annual results and a 2014
outlook on March 13.