Pedestrians walk past a German luxury fashion house Hugo Boss store in Shenzhen Bao’an International Airport.
Alex Tai | SOPA Images | LightRocket | Getty Images)
Hugo Boss shares plunged as much as 10% Tuesday after the company cut its sales outlook, becoming the latest high-end fashion line to warn of persistent woes in the luxury sector.
The German fashion house said Monday that it expects full-year sales of up to 4.35 billion euros ($4.73 billion), down slightly from a previous forecast of up to 4.45 billion euros.
The company attributed the revised outlook to “persistent macroeconomic and geopolitical challenges” and cited China and the U.K. as particularly challenging markets.
Shares pared losses slightly to trade down 8.8% as of 9:53 a.m. London time.
“We are operating in a period of significant global macro uncertainty, which also affected our performance in the second quarter,” CEO Daniel Grieder said in a statement.
“Although the timing of any macro recovery remains uncertain, our strategy of consistently investing in our strong brands, BOSS and HUGO, gives us confidence in our ability to continue driving above-trend growth and capturing further market share,” he added.
The guidance cut is the company’s second so far this year, after the retailer in March said that 2024 sales growth was likely to slow to 3% to 6%. Monday’s revision moderates that target further to 1% to 4% growth in group currency.
Hugo Boss’ group sales fell 1% on a preliminary basis in the second quarter to 1.02 billion euros, driven primarily by declines in Asia and Europe, it said Monday.
Second-quarter operating profit slumped 42% year-on-year to 70 million euros, reflecting “softer sales trends and strategic investments into the business,” the company said in its preliminary report.
Grieder said he expects the company to return to profitable growth in the second half of the year.
The adjusted outlook comes as macroeconomic and geopolitical concerns have weighed on the luxury sector more broadly, with other high-end brands including Burberry and LVMH reporting a slowdown in sales.
Burberry shares sank 16% on Monday after a disappointing fiscal first-quarter performance led it to issue a profit warning, replace its CEO and axe its dividend. The company was trading 1.3% lower as of 9:50 a.m. London time.
Swiss luxury group Richemont on Monday reported just 1% sales growth at constant exchange rates in the first quarter as a slump in Chinese sales weighed on the firm’s results.
Weaker demand from the once lucrative Chinese market has been a well telegraphed strain on the luxury sector for several quarters now, as the world’s second-largest economy struggles to re-emerge from the pandemic.
Swetha Ramachandran, global equities fund manager at Artemis Fund Managers, told CNBC that the slowdown in Chinese consumer spending may be overstated, however, with many Chinese shoppers once again making their big ticket purchases overseas.
“Before the pandemic, about 70% of luxury demand by Chinese consumers used to take place outside of mainland China. With the lockdown, with no one able to travel, that all got repatriated back to mainland China,” she told CNBC’s “Squawk Box Europe” on Tuesday.
“Now that people are on the move again, that’s again moving back abroad, which explains some of the strength in these other Asian destinations, which Chinese travellers are prioritizing at the moment,” she added, noting that Japan had proven especially popular for international shoppers given the weak yen.