Hugo Boss Q3 profit drops 25% as sales fall

German fashion firm Hugo Boss posted a 24.8 per cent drop in third quarter net income amid a continuing slowdown in demand for luxury goods. The company said it doesn't expect to see profitable growth until next year.

For the three months to September 30, profit fell to 51.5 million euros from 68.5 million euros in the same period last year. Quarterly sales dropped to 450.4 million euros from 533 million euros, a fall of 15.5 per cent.

However, the company said it has "held its ground well" so far this year, with overall sales down 9 per cent to 1.24 billion euros from 1.36 billion euros last time.

Cost cuts and reorganisation -- including reducing the complexity of its collections to save production and logistics costs, and better materials management -- have also helped keep operating profit margin flat with last year's level of 18 per cent. The group added that its own retail operations made a positive contribution to nine-month sales whereas wholesale revenues fell.

Regionally, the biggest slowdown was in Europe where sales fell by 13 per cent to 852 million euros in the first nine months of the year. In the Americas, sales rose 2 per cent to 233 million euros with declines in North America offset by a 32 per cent jump in Central and South America.

Asia Pacific revenues were flat with last year at 122 million euros although revenues at Hugo Boss' own retail operations in China more than tripled.
Looking ahead the company said: "Due to the extremely weak overall global economic situation, Hugo Boss expects a declining sales development on the level of the first three quarters for the remaining fiscal 2009." The management also sees adjusted operating margin for the year at last-year's level, and expects a first positive upswing in 2010.

News Source: AEPC India