German fashion brand Hugo Boss is optimistic of a return to profitable growth in the coming year, after booking a drop in third-quarter earnings blamed on higher markdowns to shift unsold summer stock.
For the three months to the end of September, net income slipped 18% to EUR66m (US$75.4m) from EUR80m in the year-ago period. Gross profit margin declined by 240 basis points to 62.5% from 64.9%.
The sharp decline was blamed on higher markdowns, after “the extraordinary long and hot summer along with the ensuing late start into the fall/winter season put a strain on business, particularly in Germany and France.”
Group sales in the period totalled EUR710m, edging up 1% in local currencies on EUR636m last year. The group’s own retail business saw a rise of 3% on a comp store and currency-adjusted basis, while sales from the group’s own online business grew by 38%.
Sales in the Americas and Asia/Pacific registered robust growth with a currency-adjusted increase of 7%. Europe was negatively impacted by the challenging market environment, where sales slipped 2%. In the Americas, all markets contributed to sales growth as the region booked a 5% rise.
The group has been taking steps to return to sustainable and profitable growth, including ramping up its partnership with fashion e-tailer Zalando, expanding the Boss product range to include Boss businesswear for the first time.
“A challenging market environment meant that the third quarter was not easy,” said CEO Mark Langer. “In particular the long, hot summer in Europe affected our business.”
He added the group is expecting a “strong acceleration” in sales and earnings in the fourth quarter and is “very confident” it will achieve its full-year targets. “Accordingly, we’re consistently pursuing our strategic initiatives and I’m convinced that we will return to sustainable profitable growth in the coming year.”