Hugo Boss to Hit 4 Billion Euro Sales Target in 2023, Two Years Ahead of Schedule
Hugo Boss will meet its 2025 sales target two years ahead of time, the company said as it reported a positive first quarter result.
On the back of ongoing spending to drive brand awareness, Hugo Boss reported that revenues jumped 25 percent to 968 million euros in the first three months of 2023. “We look back on an excellent start to the year, as we further accelerated brand momentum,” Hugo Boss chief executive officer Daniel Grieder said in a statement.
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It was a “record-breaking” quarter, the brand’s chief financial officer Yves Müller added in an online results conference on Thursday morning.
Despite some concerns about consumer sentiment, macroeconomic headwinds and ongoing geo-political uncertainties, the company has not seen any slowdown in demand at the beginning of the second quarter either, Hugo Boss executives said.
All of these were reasons to raise guidance for the year, Müller said, noting that the aforementioned concerns had been factored into the new forecast. Instead of increasing between 4 and 6 percent as originally expected, Hugo Boss now expects sales to grow around 10 percent in 2023. This means the company is likely to achieve its stated ambition of making 4 billion euros in annual sales in 2023, two years ahead of schedule.
Market analysts, including from Goldman Sachs, noted that the results had come in well above market expectations and Hugo Boss shares rose slightly after the announcement. Analysts had initially expected income of around 893 million euros and operating profit, or EBIT, of 59 million euros.
Instead, EBIT for the first quarter totaled 65 million euros. Hugo Boss also increased its outlook for EBIT in 2023, with the company now predicting this would grow somewhere between 10 and 20 percent over the course of this year, landing between 370 million and 400 million euros. Previously Hugo Boss had only expected EBIT to grow between 5 and 12 percent.
The positive first-quarter result comes after just over a year of an all-encompassing brand refresh and the company’s “Claim 5” strategy that has brought Hugo Boss record-breaking financial results. Previously the brand had been badly impacted by the COVID-19 health crisis, on top of several years of more staid sales results.
The company has since focused on modern suiting with a more casual bent, as well as undertaking major marketing efforts and enlisting celebrity star-power to help boost sales.
As a result of the increased marketing effort, operating expenses rose by 21 percent in the first quarter to 529 million euros, with the costs of selling and marketing increasing to 414 million euros and administrative costs adding another 114 million euros.
But the company said that increased spending was “more than compensated for” by a positive result in EBIT, which increased by 63 percent to 65 million euros in first quarter.
The company’s goal is to have marketing spend at between 7 and 8 percent of turnover, Müller explained during the press conference on the first-quarter results. It was higher at the beginning of this year — sitting at around 9 percent — because “we really put our foot on the accelerator in the first quarter,” Müller said, referring to the cost of events like the company’s March see now, buy now runway show in Miami. But these costs are expected to stabilize over the year, he continued.
But the company’s current success is not just due to its marketing efforts, Müller told WWD. “We have also invested in our product quality — particularly in the womenswear — and I believe one of the pillars of our success is our price-value proposition.”
The company’s more formal menswear line, Boss, continued to make up the majority of sales, gaining 23 percent in the first quarter. Boss womenswear rose 28 percent while the more casual Hugo line grew 31 percent.
The company was also focused on improving profitability, Müller said, adding that further plans on store productivity improvements and an update on the “Claim 5” strategy would be revealed during an investor conference in mid-June.
The biggest increase in Hugo Boss’ first-quarter income came in the Americas, where sales rose 38 percent, currency adjusted, to bring in 195 million euros.
Sales in the U.S. rose 31 percent, currency adjusted, over the first quarter. The German company has placed particular focus on the U.S., with collaborations with the likes of Russell Athletic, the National Basketball Association and most recently the National Football League, as well as its recent celebrity-studded show in Miami. The company’s relationship with department stores like Macy’s and Nordstrom also continued to evolve positively and offer more wholesale opportunities, Muller noted.
“We are very, very happy with our performance in the U.S.,” Müller said.
He credited the company’s attempts to change its image in the U.S. to more of a 24/7 lifestyle brand. “We were perceived in the U.S. as a formal or a suit brand and I think, with the introduction of sportswear products, we have improved the perception of our brand,” he explained. “That’s really helping us gain traction, especially with a younger audience. We are sending clear signals to the American consumer that we want to invest in the United States and we see a lot of growth potential there.”
Hugo Boss expects continued growth in the U.S., forecasting that sales in the Americas as a whole should grow somewhere between high single digits to mid-teens over 2023.
Sales in the Asia Pacific region gained 31 percent to bring in 141 million euros over the first quarter. Between January and March this year, Hugo Boss reported a “significant uptick in consumer sentiment in China after the abandonment of COVID-19-related restrictions” and a 25 percent increase in sales there. As the second quarter has started, Hugo Boss has continued to see “tremendous progress” in Chinese markets, Müller noted. “China is really back,” he enthused.
In Europe, the Middle East and Africa, which still makes up around two-thirds of Hugo Boss’ business, first-quarter sales rose 21 percent to 609 million euros. Business was particularly good in France and Germany, where sales rose 17 percent and 28 percent respectively.
Despite the success of the first quarter, “the company remains vigilant due to the persisting high levels of macroeconomic and geopolitical uncertainties,” Hugo Boss cautioned in its statement.
And product prices were also going up slightly due to increases in sourcing costs, Müller warned, with the pre-fall collection, due in retail this month, likely to be more expensive to consumers, rising by low-single-digit percentages.
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