Hugo Boss pares outlook due to tough U.S. market

Hugo Boss expects full-year sales and earnings to come in at the lower end of its forecasts due to challenges in the U.S. market, despite strong sales growth in China, the German fashion house said on Thursday.

Shares in the company, which have fallen by a quarter in the past year, were down 2% in early trade.

Known for its smart men’s suits, Hugo Boss has introduced more casual and sportswear styles to appeal to a younger audience, recently teaming up with former One Direction singer Liam Payne and Taiwanese-Canadian actor Mark Chao.

That strategy has been paying off in Europe - its biggest market - where sales rose 2% in the second quarter, and especially in Asia, with sales expanding at double-digit rates in China on a comparative store and currency-adjusted basis.

That mirrors a trend seen at other high-end fashion players like jacket maker Moncler and Louis Vuitton owner LVMH, which have been riding high on demand for branded goods across Asia.

However, Hugo Boss said quarterly sales fell 3% in the Americas, which it blamed on the easing of the positive effects of tax reform, weaker business with tourists and a highly promotional market.

Overall, second-quarter operating profit rose 3% to 76 million euros ($83.97 million) on sales up a currency-adjusted 2% to 675 million euros - shy of average analyst forecasts for 79 million and 677 million.

It now expects a slight decline in currency-adjusted sales for the Americas for the full-year, compared with a previous prediction for an increase.

For the group, it expects 2019 currency-adjusted sales growth to be at the lower end of an outlook for a mid single-digit percentage rise, and operating profit to be at the lower end of its forecast for a high single-digit percentage increase.