October 31, 2012 - Germany
October 31, 2012 - Germany
“We are confident to reach our full year targets despite a more difficult economic environment", says Claus-Dietrich Lahrs, CEO and Chairman of the Managing Board of HUGO BOSS AG. "The change in our collection cycle has led to a sales shift in our wholesale business from the third into the fourth quarter. This had an adverse impact on our traditionally strong earnings in the third quarter. We shall, however, return to double-digit growth in sales and earnings in the fourth quarter with our winter business."
New collection and delivery cycle affects performance in the third quarter
Total net sales were stable on a currency-adjusted basis in the third quarter of 2012. In euros, the Group posted growth of 5% to EUR 646 million (2011: EUR 615 million). In Europe, sales fell by 4% on a currency-adjusted basis due to the development of the wholesale business. In the Americas, the U.S. market was the main driver for growth of 13% after adjustment for currency effects.
Asia posted a stable performance on a currency-adjusted basis. While growth picked up in China in comparison with the previous quarter, standing at 5%, the Australian and Japanese markets, in particular, weakened.
Wholesale sales were down 9% year-on-year in local currencies. This trend was adversely affected by the change of the collection and delivery cycle and the resulting delivery of a significant proportion of the Fall collection already in the second quarter. In addition, many retail partners now spread their orders more evenly over the year as a consequence of the more season focused collection cycle, which means that the second and fourth quarters become continuously more important.
The Group’s own retail business (including outlets and online business) posted growth after adjustment for currency effects of 15%. On a comparable store basis, the increase amounted to 2%.
The Group’s gross profit margin increased by 130 basis points to 60.1% (2011: 58.8%) mainly because of the higher proportion of sales from the Group’s own retail business. EBITDA before special items decreased by 7% to EUR 165 million (2011: EUR 177 million) because of the increased costs associated with the expansion of the Group’s own retail business and higher marketing expenses, which could not be offset by matching growth in sales in the third quarter.
The adjusted EBITDA margin fell by 320 basis points to 25.6% in the third quarter (2011: 28.8%). Special items of EUR 2 million (2011: EUR 0 million) were associated with the simplification of the brand structure announced in July and the bundling of the creative areas under the core BOSS brand.
Group sales grew by 11% in the first nine months of 2012
In the first nine months, currency-neutral wholesale sales were 1% lower year-on-year, while the Group’s own retail business added 19% in the same period. On a comparable store basis, growth in this distribution channel amounted to 5%.
With the help of sharply increased sales in the Group’s own retail business and efficiency improvements in production and sourcing, the gross profit margin was increased by 120 basis points to 61.1% (2011: 59.9%). EBITDA before special items improved by 5% to EUR 392 million (2011: EUR 372 million). The adjusted EBITDA margin fell by 140 basis points to 22.5% (2011: 23.9%).
Financial liabilities up slightly year-on-year at the end of the quarter
Trade net working capital increased by 8% to EUR 510 million at the end of the third quarter (September 30, 2011: EUR 470 million).
The increase in inventories slowed further compared with the previous quarter and amounted to 12% in reporting currency and 6% after adjustment for exchange rate effects respectively at the end of the period.
At EUR 88 million, investment exceeded the level of the previous year (2011: EUR 61 million) because of renovations to the Group's own retail network and infrastructure projects. Net financial liabilities increased slightly year-on-year as a consequence of these developments to EUR 250 million (September 30, 2011: EUR 247 million).
Management confirms financial outlook
HUGO BOSS expects currency-adjusted growth in sales of up to 10% in 2012. All regions are to contribute to this. While sales will remain roughly stable in the wholesale business, a double-digit increase is forecast for the Group’s own retail business.
Double-digit increases in sales and earnings are expected for the fourth quarter. The Group forecasts circa 80 net openings of new stores and shops-in-shops in the course of the year.
As a consequence of the planned expansion in the Group’s own retail network, of renovations to existing stores as well as infrastructure projects such as the construction of a new warehouse for flat-packed goods, investment in 2012 will exceed the previous year's figure.
An increase of between 10% and 12% is expected for the operating result (EBITDA before special items).