Europe revival lifts sales at fashion house Hugo Boss

A pick-up in European sales proved the bright spot for Hugo Boss in the second quarter, as the German fashion house pursues a turnaround in its home market and updates some of its ranges to try to draw in younger shoppers.

However, earnings before interest, taxation, depreciation and amortization (EBITDA) before special items slipped 1 percent from a year ago to 106 million euros ($123 million) in the three months, just below average analyst forecasts for 107 million euros.

Shares in the German company fell more than 4 percent in early trade.

The company said sales rose 6 percent in the second quarter on a currency-adjusted basis, with revenues coming in at a higher-than-expected 653 million euros.

Luxury labels worldwide, including market leaders like LVMH’s LVMH Louis Vuitton and Kering’s Gucci, are still benefiting from strong Chinese demand in spite of a U.S.-China trade spat that has rattled markets.

Hugo Boss also did well in Asia, although the pace of sales growth in that region slowed from a quarter earlier.

But the brightest spot was for the maker of slick men’s suits was its core Europe market, helping to offset a weaker performance in the Americas after its U.S. wholesale revenues declined.

Currency-adjusted sales in Europe rose 9 percent from a year ago and inched into positive territory in Germany, where the backdrop for clothing retailers has long been sluggish.

“Our strategic realignment is taking effect. We are right on track,” Chief Executive Mark Langer said in a statement, adding the company was confident of meeting its 2018 targets.

Some luxury labels have struggled more than others to benefit from the boom times, as they fight it out to attract young customers constantly in search of novelty and with shifting tastes.

Hugo Boss reversed efforts to go more upmarket and expand in womenswear after a string of profit warnings in 2015 and 2016.

It is returning to its roots selling men’s suits, but also introducing more casual styles, at a time when so-called streetwear styles like hoodies and sneakers are taking catwalks by storm.

Sales at the company’s “Hugo” brand, which is being updated for younger customers, fell 4 percent in currency-adjusted terms from a year earlier, although the decline was less marked the 6 percent drop from a quarter earlier.