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UBS upgrades Hugo Boss to 'buy' on valuation rebound hopes

investing.com 03/12/2024 - 15:01 PM

UBS Upgrades Hugo Boss to Buy

UBS has upgraded Hugo Boss (ETR:BOSSn) AG NA O.N. (BS:BOSSd) to a “buy” rating, anticipating that the company’s earnings revisions have bottomed out and valuation is set for a rebound in 2025.

Recovery in Consumer Spending

The brokerage foresees that Hugo Boss shares will benefit from a recovery in consumer spending across Europe, the Middle East, Africa (EMEA), and North America, regions that collectively account for 84% of the company’s sales.

Hugo Boss is well-positioned in the premium segment due to its geographic diversification and limited reliance on the uncertain consumer recovery in China.

Stabilization of Retail Environment

Analysts have observed early signs of stabilization in the broader retail environment, especially in brick-and-mortar stores, following a challenging 2024. With improving spending intentions in the U.S. and sustained demand in Europe, a better sales growth outlook for Hugo Boss in 2025 is expected.

Earnings and Valuation

Currently, Hugo Boss shares are trading at about 9 times the estimated earnings for 2025, with UBS predicting a potential re-rating to 14x by next year. UBS's price target of €49 indicates a 20% upside, underpinned by expectations of steady earnings growth and improvements in gross margins.

Risks to Outlook

While UBS maintains a positive view on the premium consumer market heading into 2025, several risks have been flagged. These include potential geopolitical tensions, rising freight costs, increased promotional activity, and tariff changes in the U.S., which could pressure margins and affect earnings.




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