October 30, 2012 / 7:46 AM / 5 years ago

UPDATE 2-Hugo Boss says China sales pick up in Q3

3 Min Read

* Q3 sales 646 mln eur vs Rtrs poll avg 649 mln

* Q3 EBITDA before items 165 mln eur, down 7 pct

* Q3 sales in China up 5 pct vs 1 pct in Q2

* CEO sees situation in China changing by end of year

FRANKFURT, Oct 30 (Reuters) - German fashion house Hugo Boss said a pick-up in its Chinese luxury goods market in the third quarter should gather pace by the end of the year on the back of growing consumer confidence.

Chinese demand has helped luxury companies from LVMH to Burberry and Mulberry to offset weak growth in Europe, but warnings of a slowdown there have hit shares in the luxury sector over the last couple of months.

Consultancy Bain & Co this month forecast global luxury sales growth would slow sharply to 5 percent this year from 13 percent in 2011 as Chinese and European consumers cut spending.

Shares in Hugo Boss have lost 13 percent of their value over the last three months, but were up 2.9 percent at 1443 GMT on Tuesday.

Hugo Boss Chief Executive Claus-Dietrich Lahrs said he thought stores would still suffer from lower customer numbers for the remainder of the year, but that political clarity following the unveiling of China's new leaders would boost consumer confidence soon.

"We're confident that the beginning of next year will show another situation," he told analysts on Tuesday after the company posted flat third-quarter sales and a drop in core profit.

Hugo Boss, known for its stylish suits, said sales in China rose 5 percent compared with just 1 percent in the second quarter.

Group third-quarter net sales were 646 million euros ($833.7 million), flat on a currency-adjusted basis after a rise of 14 percent in the second quarter.

That was partly down to a change in the number of collections it produces each year, which means that more wholesale partners now order in the second and fourth quarters, rather than the third quarter as they did previously.

Hugo Boss has gone up to four collections a year to keep up with rivals and bring fresh designs to stores more quickly.

Earnings before interest, tax, depreciation, amortisation (EBITDA) and special items dropped 7 percent to 165 million euros as it invested in its shops and marketing.

"We shall, however, return to double-digit growth in sales and earnings in the fourth quarter with our winter business," Lahrs said.

The group maintained a forecast to increase 2012 sales by up to 10 percent and core profit by 10-12 percent, but Lahrs declined to give any forecasts for 2013.

While saying it had seen the global economy deteriorate in the third quarter compared to the second, Hugo Boss performed best in the United States, where sales rose 13 percent on a currency-adjusted basis.

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