Hugo Boss expects Europe rebound after forex hits sales

FRANKFURT, Germany - Fashion house Hugo Boss said it was expecting sales and earnings growth to increase in the last part of 2013, supported by a recovery in Europe after currency effects took a bite out of third-quarter sales.

Sales in the quarter rose just 2 percent to 658 million euros ($906 million), against expectations for 677 million. Stripping out the effects of translating sales made in other currencies into euros, sales would have risen 5 percent, the group said on Thursday.

The German group needs a strong finish to 2013 to meet full-year targets after sales in China, previously the growth engine for luxury firms, stuttered this year, and Europe's economic weakness continued into the first part of the year.

Before Thursday's results, analysts were forecasting 2013 sales up 6 percent, unadjusted for currencies, to 2.48 billion euros and earnings before interest, tax, depreciation, amortisation and special items (EBITDA) of 566 million.

Hugo Boss said currency-adjusted sales and earnings would rise by between 6-8 percent for the year as a whole.

Analysts at Close Brothers Seydler said sales were more affected by exchange rates than they had expected. "At a first glance, it appears that our estimates for 2013 might prove a little bit too high on the unadjusted level."

Still, Hugo Boss Chief executive Claus-Dietrich Lahrs was upbeat for the fourth quarter, and highlighted a positive trend in Europe.

"Demand in our own stores picked up noticeably in the third quarter compared to the first half year. We are therefore anticipating strong growth in sales and earnings in the fourth quarter," he said in a statement.

For the third quarter, the group reported core profit in line with expectations at 173 million euros.