Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hugo Boss AG (BOSSY, Financial) reported a 1% increase in group sales for Q3, contributing to a 2% year-on-year growth over the first nine months.
- The company successfully improved cost efficiency, limiting operating expenses growth to 1% in Q3, a significant improvement from the 9% increase in Q2.
- Hugo Boss AG (BOSSY) achieved a 6% growth in its digital business, driven by strong performance with digital partners, particularly in Europe.
- The company's marketing initiatives, including a successful campaign featuring David Beckham, more than doubled social media engagement compared to last year.
- Hugo Boss AG (BOSSY) maintained a robust wholesale performance, with sales up 4% in Q3, marking the 14th consecutive quarter of revenue growth in physical wholesale.
Negative Points
- Sales in the Asia Pacific region declined by 7% in Q3, primarily due to subdued consumer confidence in China.
- The company's gross margin declined by 50 basis points in Q3, impacted by higher freight rates, a competitive promotional landscape, and adverse currency effects.
- Brick-and-mortar retail sales were 3% below the prior year, affected by traffic declines in key markets such as the UK and China.
- Net income after minorities decreased by 13% compared to the prior year, reflecting a modest increase in net financial expenses.
- Hugo Boss AG (BOSSY) faces ongoing macroeconomic uncertainties and weak consumer sentiment, particularly impacting its performance in China.
Q & A Highlights
Q: Can you provide insights on current trading in September and October, and discuss the gross margin outlook for Q4?
A: Current trading showed gradual improvement from July to September, with October's performance similar to the end of Q3. We remain cautious about consumer sentiment and macroeconomic uncertainties. For Q4, structural improvements in gross margin from sourcing efficiencies will continue, but freight costs remain elevated. Promotional activity is expected to stay at similar levels, with a slightly easier comparison base in Q4.
Q: Could you elaborate on the OpEx control in Q3 and expectations for Q4? Also, any comments on 2025 targets?
A: OpEx growth was limited to low single digits in Q3, and we aim to maintain this in Q4. Promotions are expected to remain stable. Regarding 2025 targets, achieving EUR5 billion in sales and a 12% EBIT margin may take longer due to macroeconomic uncertainties. We will provide more concrete guidance in March 2025.
Q: What are the strategic plans for China given the current market weakness?
A: We are focusing on larger stores to enhance customer experience, such as the new BOSS halo store in Shanghai. Our product strategy includes expanding BOSS Green offerings, which align with Chinese consumer preferences. We are also increasing our presence on digital platforms like TikTok.
Q: Can you discuss the performance of HUGO Blue and its impact on wholesale?
A: HUGO Blue is expected to account for up to 10% of HUGO sales by year-end, with minimal cannibalization of other HUGO products. Even excluding HUGO Blue, wholesale performance remains positive, with growth around 3%.
Q: How is the digital channel performing, and what is the impact of freight costs on gross margins?
A: Digital sales grew by 6% in Q3, driven by strong performance from digital partners. We are reducing air freight usage, currently at mid-teens percentage, aiming for high single digits. Freight costs have been a broad-based challenge, affecting both sea and air freight rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
