Hugo Boss: record sales in 2023 but disappointing margin

(AOF) – German fashion group, Hugo Boss fell 10.69% to 59.50 euros in Frankfurt. This sharp drop is due to an operating profit below analysts’ estimates in the fourth quarter: 121 million euros (+17%) against a consensus of 129 million euros, according to preliminary data. However, the company posted good commercial performance in 2023. It signed record sales which jumped 15% to amount to 4.2 billion euros compared to 3.6 billion euros in 2022. This increase sales is driven by the successful execution of its ‘Claim 5’ strategy.

“The double-digit improvements in our turnover and net profit over the last quarter are remarkable when taking into account the current difficult global market environment,” explains its CEO Daniel Grieder.

The German group thus achieved its objective since it targeted growth in its turnover between 12 and 15% for 2023, or between 4.1 and 4.2 billion euros.

Hugo Boss expects operating profit (Ebit) to increase by 22% to €410 million for the 2023 financial year from €335 million in 2022. It is in line with the latest company’s forecast range (increase of between 20 and 25% to reach 400-420 million euros).

The 2023 EBIT margin is expected to increase to 9.8% from 9.2% in 2022.

“Although the EBIT margin of 10.3% in the fourth quarter was in line with our estimates, it was 80 basis points lower than expected, which could raise concerns about the company’s gross margin,” comments UBS which remains Buy on the stock with an unchanged price target of 85 euros, following the 2023 commercial performance of Hugo Boss.

However, UBS is optimistic about the future of the German fashion group: “Following recent profit warnings from European retailers and brands such as JD Sports and Burberry, we believe Boss’s turnaround is on track thanks to strong brand momentum that persists and outweighs the impact of macroeconomic uncertainty. Although the stock may see some weakness today, we believe the ~20% discount in PER to to the retail sector is not justified”.

In terms of prospects, by 2025, Hugo Boss expects a turnover of 5 billion euros and an EBIT of at least 600 million euros, i.e. an EBIT margin of at least 12%.

Hugo Boss will publish its final results for the year 2023 and will communicate its financial outlook for the 2024 financial year on March 7.

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