Investing.com — Hugo Boss (ETR:) exceeded market expectations for its third-quarter earnings on Tuesday, reporting an EBIT that came in about 6% above consensus forecasts, largely due to effective cost management.
Despite the stronger-than-expected EBIT, Hugo Boss has kept its guidance for the full fiscal year steady, with Q4 being historically its most important quarter and two critical months still ahead.
For Q3, Hugo Boss reported sales of €1.03 billion, a slight 1% year-over-year increase in constant currency, aligning with company and consensus expectations.
EBIT rose to €95 million, surpassing consensus projections of €90 million. The company posted earnings per share of €0.79, a slight dip from RBC’s own forecast of €0.85 and consensus of €0.81.
“We think that BOSS is a good player that is gaining share in the premium apparel space, however we think that a tougher backdrop in key markets has been weighing on performance in recent quarters,” said analysts from RBC Capital Markets in a note.
In terms of regional performance, sales in the EMEA region were up by 1% year-over-year in constant currency, and sales in the Americas increased by 4%, both performing slightly above expectations.
However, the APAC region faced a setback, with sales down 7%, driven by declines in China that more than offset the growth seen in Southeast Asia and the Pacific.
While Hugo Boss has benefited from sourcing efficiencies and favorable product costs, gross margins nonetheless decreased by 50 basis points compared to the same period last year.
Factors affecting margin included increased freight rates, an unfavorable regional mix, and intensified promotions.
RBC analysts estimated that these combined pressures led to a total gross margin decline of 250 basis points for Hugo Boss, only partially counteracted by positive impacts.
Operational efficiency remains a priority for the company, with operating expenses up just 1% year-over-year, an indicator of the brand’s intensified focus on reducing non-essential administrative costs. Hugo Boss also managed to bring down inventory levels by 6% in Q3, an area where the company has aimed to boost efficiency.
For the full fiscal year, Hugo Boss continues to project group sales between €4.2 billion and €4.35 billion, with EBIT guidance in the €350-430 million range, aligned with RBC and consensus estimates.
“We expect more meaningful cost efficiencies to come for logistics costs, following the expansion of BOSS’s Filderstadt warehouse,” RBC said.
“Longer term, we think that BOSS remains well-placed to continue to take share in the premium apparel segment with further productivity gains and margin expansion to come,” the analysts added.