Dive Brief:
- Hugo Boss posted 5% sales gains for the first quarter of 2024, according to a Thursday earnings report.
- While the company saw single-digit growth for the period at both its Boss and Hugo brands, momentum slowed significantly from the prior year, during which Boss menswear grew 24%, Boss womenswear grew 29% and Hugo grew 33%.
- Sales in EMEA grew 4% in this year’s Q1, compared to 21% growth for the same period in 2023. Meanwhile, sales in the Americas were up 12% for the quarter versus a 45% uptick last year. This year, there was also a Q1 sales decline of 2% in the Asia/Pacific region, which the company attributed in part to “overall muted local demand” in China. In the previous year’s report, sales for the Asia/Pacific region grew 29%.
Dive Insight:
Daniel Grieder, the company’s CEO, said in the release that he was pleased with the sales gains and improvements for the period.
“In a volatile market environment, we remain focused on rigorously executing our ‘CLAIM 5’ strategy, capitalizing on our numerous growth opportunities,” Grieder said. “By leveraging our strong business platform, we remain equally committed to realizing further efficiencies. All of this will enable us to continue our profitable growth trajectory also in 2024.”
The company’s digital business growth trajectory in Q1 slowed to 9% versus 22% for the same period last year, while brick-and-mortar retail grew 2%, compared to 27% in Q1 last year. Brick-and-mortar wholesale expanded by 8% versus 28% growth for the same period in 2023.
“Although recent double digit growth in sales has been driven by strong brand momentum we expect it to moderate in the years to come,” Jelena Sokolova, senior equity analyst at Morningstar Research Services, wrote in a report sent to Fashion Dive. “We expect 5-6% sales growth in 2024 (toward the higher end of management's 3%-6% outlook). We expect deceleration thereafter to a low-single-digit growth rate to factor in generally slower growth of the apparel luxury segment, competitiveness of the apparel category, and Hugo Boss’ higher exposure to slower growing developed markets.”
Hugo Boss is working to promote its new Hugo Blue denim-focused line. Sokolova said the entry barriers in casualwear to be lower “given the easier sizing and fit.” However, she added that while the analysts “like the edgier marketing and increased marketing investments, we are a bit skeptical of this being consistently successful in categories outside the brand’s core competencies.”
The company’s formalwear roots could help it weather certain market unevenness, however, because although Sokolova said apparel is “a relatively weaker category in the luxury goods sector” she added that “formal menswear is a relatively more stable market niche.” That’s in part because men tend to be more loyal to brands than women, and in part because formalwear isn’t subjected to the same fashion trend changes as other apparel categories, she said.
Nonetheless, Sokolova said formalwear was “a recently lagging category as the athleisure trend gained traction and casual wardrobes became more acceptable in the workplace, possibly driven by younger consumers or by strong hiring trends at more informal dress code industries such as technology versus more formal ones, such as banking, after the financial crisis.”
In its Q1 earnings, Hugo Boss confirmed its current fiscal year outlook and said it “remains vigilant with regard to the persistently high levels of macroeconomic and geopolitical uncertainty, which are expected to continue weighing on global consumer sentiment in fiscal year 2024.” In light of that, the company said it “continues to expect Group sales in the reporting currency to increase within a range of 3% to 6% in 2024” and reach between 4.3 billion euros and 4.45 billion euros.
Despite the current strong brand momentum, Sokolova said, “we are still somewhat skeptical of management's 2025 targets” to reach 5 billion euros and to reach “12% operating margin given the slow growth and competitiveness of the underlying market (premium apparel) where Hugo Boss operates.”
