* Q2 sales up 11 pct to 532 mln euros
* Q2 core profit 102 mln euros vs I/B/E/S forecast 95 mln
* Gross margin jumps to 65.8 pct, from 62.4 pct
* Confirms targets for 2013
FRANKFURT, July 31 German fashion house Hugo
Boss said tight stock management and fewer discounts
drove up profits and that shoppers in the United States helped
offset a still-challenging market in mainland China.
The company's second-quarter rise in sales and profit are
further evidence of a rebound in the luxury sector after rivals
LVMH and Kering reported accelerating sales
growth and higher profits this month.
In the past year China's luxury market, which had been the
industry's main growth driver, has been hit by a slower economy
and the government's crackdown on the country's tradition of
gift-giving to facilitate transactions and deals.
Hugo Boss's Chief Financial Officer Mark Langer said the
number of people visiting malls in some smaller cities in China
had fallen by as much as 20 percent, and that the group had to
bring the quality of its mainland stores up to those in Hong
The fashion house said that in the United States, its
biggest market, and Europe, it benefited from tourists from Asia
and Latin America spending money on its suits and shirts.
It reported second-quarter sales up 11 percent on a
currency-adjusted basis to 532 million euros ($705 million) and
earnings before interest, tax, depreciation, amortisation and
special items (EBITDA) of 102 million euros for the quarter, up
While the sales came in slightly below the average forecast,
core profit beat the Thomson Reuters I/B/E/S consensus of 94.8
The group's gross profit margin - a key measure of
profitability in the clothing and apparel industry - rose 3.4
percentage points to 65.8 percent in the quarter, above
The margin gain is down to the fact it kept stock levels
tight, with inventory levels dropping 9 percent, it said. That
meant it could cut back on the amount of discounts it had to
offer to clear shelves.
In addition, Hugo Boss is selling more clothes through its
own stores, rather than wholesale partners, a trend accelerated
by it taking over control of selling space from department store
partners such as El Corte Ingles in Spain and Woehrl in Germany.
On Wednesday, it announced its first major deal of this kind
in the United States, with an agreement to take control of 37
shop-in-shops in Saks department stores.
"We don't see any more immediate concession takeovers (in
Europe and the United States)," Langer told analysts. "But we
know wholesale partners are watching the process closely to see
if they would like to evaluate such a business model."
He added he did not expect the deal to be derailed by the
bid for Saks from Canada's Hudson's Bay.
Sales in the United States, its biggest market, rose 7
percent in the first half, compared with 5 percent for China.
After sales in greater China grew just 1 percent in the
first quarter, they recovered to rise 9 percent in the second
quarter, driven mostly by Hong Kong, Hugo Boss said.
The company confirmed full-year expectations for core
earnings and sales to rise by around 7-9 percent.
Langer said the first half of the year had been tougher than
expected but that the firm was confident it would reach its
However, Commerzbank analyst Andreas Riemann said: "Despite
a better second quarter, we still regard the 2013 guidance and
consensus as ambitious."