Hugo Boss Exceeds Market Expectations in Q3 Earnings

Hugo Boss (ETR:BOSSn) surpassed market expectations for its third-quarter earnings on Tuesday, reporting an EBIT approximately 6% above consensus forecasts, largely thanks to effective cost management.

Despite the stronger-than-expected EBIT, Hugo Boss maintained its guidance for the full fiscal year steady, with Q4 being historically its most significant quarter and two critical months still ahead.

For Q3, Hugo Boss reported sales of €1.03 billion, reflecting a slight 1% year-over-year increase in constant currency, which aligned with both company and consensus expectations.

EBIT increased to €95 million, exceeding consensus projections of €90 million. The company's earnings per share stood at €0.79, slightly below RBC's forecast of €0.85 and consensus of €0.81.

> Analysts from RBC Capital Markets noted, "We think that BOSS is a good player gaining share in the premium apparel space. However, a tougher backdrop in key markets has been weighing on performance in recent quarters."

Regional performance saw sales in the EMEA region rise by 1% year-over-year in constant currency, while sales in the Americas increased by 4%, both exceeding expectations. In contrast, the APAC region faced challenges, with sales declining by 7%, primarily due to drops in China that offset growth in Southeast Asia and the Pacific.

Although Hugo Boss benefited from sourcing efficiencies and favorable product costs, gross margins decreased by 50 basis points compared to the same period last year due to increased freight rates, an unfavorable regional mix, and intensified promotions. RBC analysts estimated these combined pressures led to a total gross margin decline of 250 basis points, only partially offset by positive impacts.

Operational efficiency remains a priority, with operating expenses rising just 1% year-over-year, indicating the brand's focus on minimizing non-essential administrative costs. Additionally, Hugo Boss successfully reduced inventory levels by 6% in Q3, further enhancing efficiency.

For the full fiscal year, Hugo Boss continues to project group sales between €4.2 billion and €4.35 billion, with EBIT guidance ranging from €350 million to €430 million, consistent with RBC and consensus estimates.

> RBC added, "We expect more meaningful cost efficiencies for logistics costs following the expansion of BOSS's Filderstadt warehouse. Long-term, we believe BOSS remains well-positioned to continue gaining share in the premium apparel segment with further productivity gains and margin expansion."