• Q1 profit down 0.5% to EUR81.6m
  • Sales climb 3% to EUR613m 
  • Double-digit sales growth from womenswear
Retail sales grew 19% in local currencies during the first quarter

Retail sales grew 19% in local currencies during the first quarter

German fashion business Hugo Boss has reported a slight drop in first-quarter profit despite double-digit revenue growth in its women's wear business. 

The group's net income came to EUR81.6m (US$113.7m) for the three months to 31 March, compared to EUR82m in the same period of the previous year.

Sales climbed 3% to EUR613m from EUR594m last year, driven by an 8% currency-adjusted sales growth in Europe. Asia sales increased 7% in local currencies, driven by demand in Japan and Australia.

In the Americas region, however, currency-adjusted sales edged down 2%.

Wholesale revenues fell 6% on a currency-adjusted basis, while the group's own retail business saw sales grow 19% in local currencies.

Gross margin improved 360 basis points to 65.4%, due to reduced markdowns and above-average growth in the group's own retail business.

"We had a good start to the year," said CEO and chairman Claus-Dietrich Lahrs. "Thanks to a strong development in Europe, we were able to compensate for the challenging market environment, above all in North America and China.

"At the same time, our strategic focus on Boss Womenswear resulted in double-digit growth rates in this part of our business. The investments in brand, distribution and logistics negatively affected our earnings development in the period, but will support sales and profit growth for the rest of the year and beyond." 

Bank of America Merrill Lynch analyst Ashley Wallace sees womenswear as a "significant opportunity" for Hugo Boss "given it's a new revenue stream it can grow with cannibalising exisiting revenues (only 11% of revenues in 2013), and importantly provides a solid platform to increase the proportion of high-margin leather goods within the mix".