Hugo Boss Raises Guidance After ‘Record’ Q2
Other German clothing brands and retailers may be struggling, predicting a fall in consumer sentiment and potentially raising prices in an inflationary economy. But German formalwear expert Hugo Boss continues to be optimistic. The marquee brand raised guidance after executives described as a “record” second quarter. Hugo Boss’ brand refresh and marketing campaigns helped to send sales up 34 percent, currency adjusted, during the second quarter of this year to 878 million euros.
The company, best known for its men’s formalwear, had seen sales plummet during the pandemic as events were canceled and consumers worked from home. In the middle of 2021, Hugo Boss started with a new chief executive officer, Daniel Grieder, and a new business strategy.
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“It’s been one year since we introduced our new growth strategy,” Hugo Boss’ chief financial officer Yves Mueller told journalists during an online press conference. “We were convinced it was the right strategy at the right time. But even so, we’ve been surprised at how fast we are progressing.”
First-half sales gained 42 percent to hit 1.65 billion euros and thanks to the positive results, Hugo Boss raised its guidance for the full year.
Previously, the company thought it might see sales growth of between 10 and 15 percent. Now, it said, it expected between 20 and 25 percent growth, bringing in between 3.3 billion and 3.5 billion euros over the whole year.
“We realize that this kind of prognosis is unusual at this time,” Mueller conceded, acknowledging that consumer sentiment was depressed and that a recession in Europe and America was a clear possibility. “We have taken macroeconomic factors and the uncertain business environment into account,” he told WWD. “We are confident when it comes to the second half of 2022 and despite the difficult market conditions, we’re heading into the fall season with confidence.”
Hugo Boss also unveiled its new fall campaign starring Naomi Campbell along side Kendall Jenner, rap star Future and others.
Market analysts from the likes of the Royal Bank of Canada, Morgan Stanley and Baader Bank applauded Wednesday’s results, saying that the fast-paced brand refresh showed the company was now heading in the right direction and, despite difficult conditions, Hugo Boss did have room to grow.
At the same time, the German marquee brand also said costs had risen. Operating expenses rose 34 percent during the quarter to hit 458 million euros. Of that, marketing expenses had gone up 29 percent during the second quarter, with a spend of 58 million euros on extending the brand refresh as well as a number of attention-getting social media campaigns, capsule collections and collaborations.
The brand plans to keep spending that much, Mueller confirmed, explaining that this was necessary if Hugo Boss was to achieve its ambition of being “one of the top 100 brands in the world” by 2025.
The extra spending had also had a positive impact on the company’s margins, the executive said. EBIT more than doubled over the quarter to 100 million euros versus 42 million euros a year ago.
“There’s a very simple reason for this,” Mueller told journalists. Better brand recognition meant that Hugo Boss didn’t have to sell so much at discount and was making more full-price sales.
“This more than compensated for persistently high levels of freight costs as well as an unfavorable development of exchange rates,” the company’s press release added.
Hugo Boss also raised the prognosis for its EBIT for 2022, predicting it would come in somewhere between 285 million and 310 million euros. Previously, the brand thought it wouldn’t have topped 280 million euros.
The company reported that sales of menswear in the more formal Boss category, which includes suits and which still makes up the bulk of the company’s sales, had risen 35 percent, currency adjusted, to 701 million euros during the second quarter.
As events like weddings were being scheduled again and offices reopened, Boss sales “exceeded pre-pandemic levels for the first time,” the company reported. Womenswear in this category brought in 52 million euros.
In terms of what was on the order books for Boss for the rest of the year, Mueller noted that the company’s investment into suiting innovations — things like non-iron suits, performance fabrics and more smart-casual combinations — was paying off. Collaborations between Boss and the likes of the NBA and Porsche had also been successful and would continue, he added.
“As of now, we have not seen a change in consumer behavior nor a slowdown in the overall consumer demand,” Mueller told WWD.
Meanwhile, the more casual Hugo category grew 37 percent, currency adjusted, to 125 million euros in the second quarter. Offerings in this category include athleticwear and capsule collections together with brands like the Japanese streetwear specialist A Bathing Ape.
“We want to strengthen the streetwear aspect of Hugo,” Mueller explained, “and improve our denim competence too.” That was why in the third quarter of the year, Hugo will be working with Italian brand Replay, he noted.
In North America, Hugo Boss recorded a sales increase of 23 percent. This fed into a rise of 45 percent, currency adjusted, in the Americas territory altogether this quarter. The brand saw a total of 200 million euros in sales there.
Hugo Boss’ home market of Europe remains its biggest though. There, the company saw a 41 percent increase, currency adjusted, in sales to hit 549 million euros. It credited particularly good momentum in France and the U.K. for the positive results.
The company has previously said it was not as exposed to the Chinese market and, unlike many, had mostly avoided fallout from a political boycott of Western-made goods there. However this quarter, it still had to cope with pandemic-related store closures. Mueller explained that although the company saw seen some improvements in July, a third of Hugo Boss retailers had been closed in China during April and May. As a result, the brand recorded a 34 percent decrease in sales in greater China.
However double-digit growth in other parts of the Asia Pacific territory meant that Hugo Boss’ sales remained flat during the second quarter. The brand made 110 million euros in sales there during the second quarter.
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