Hugo Boss said the market environment in North America further deteriorated during the third quarter

Hugo Boss said the market environment in North America further deteriorated during the third quarter

German fashion brand Hugo Boss has slashed its full-year outlook, blaming a lack of local demand in North America and political unrest in Hong Kong for preliminary third-quarter results that were below the group's expectations.

Hugo Boss said currency-adjusted group sales in the quarter were flat with last year, representing an increase of 1% in the reporting currency to EUR720m (US$793.6m). Group-wide retail sales increased 3% in total and 2% on a comp store basis, both adjusted for currency effects.

Operating profit (EBIT), meanwhile, were EUR80m on a preliminary basis (excluding the effects of IFRS 16). This compares to EUR92 last year and was below expectations. Besides lower than anticipated sales growth, Hugo Boss said higher expenses relating to management changes also contributed.

The firm said "persistent macroeconomic uncertainties" are increasingly weigh on consumer demand.

It added the market environment in North America, in particular, further deteriorated during the third quarter and weighed on the group's sales and earnings. Besides lower local demand, there was also a fall in sales generated by tourists.

In addition, Hugo Boss said business in Hong Kong has been "substantially negatively affected" by ongoing political unrest and demonstrations.

Management now expects currency-adjusted group sales for full year 2019 to increase at a low single-digit percentage rate, compared to earlier forecasts for an increase at the lower end of a mid-single-digit percentage range.

In addition, operating profit (EBIT) of between EUR330m and EUR340m is seen for the full year (excluding the effects of IFRS 16), down from EUR347 in the prior year. Management's previous outlook provided for an increase in EBIT at the lower end of a high single-digit percentage range.  

"Despite heightened macroeconomic uncertainties that we are currently facing, we remain focused on successfully executing against our strategic initiatives," said CEO Mark Langer. "Structurally improving our profitability plays a decisive role in that regard. We adhere to our mid-term target of an EBIT margin of 15%."

Hugo Boss will release its full set of third-quarter results on 5 November, along with a detailed outlook for fiscal 2019.