Hugo Boss expects recovery from Q2 on e-sales, China and casualisation

By

Sandra Halliday

Published
Mar 11, 2021

Hugo Boss on Thursday reported an operating profit for Q4 and said it expects a “gradual business recovery” this year. But the German company, in which UK-based Frasers Group holds a sizeable stake, said the negative implications of the pandemic had a “significant impact” on the business last year, particularly in its largest region, Europe.

Quarterly currency-adjusted sales fell 26%, or 29% on a reported basis to €583 million. But it was able to record positive EBIT of €13 million, although this was down sharply from €124 million in Q2 2019. It was helped by tight cost controls. 

But while store closures hit it hard in Europe throughout the year and into Q4, business in the Americas and in Asia/Pacific was able to continue its gradual recovery in the fourth quarter. Sequential improvements in the key US market supported overall sales growth in the Americas, while sales in Asia/Pacific came in only slightly below the prior year as mainland China successfully continued its strong double-digit growth trajectory. 

It didn’t break out online sales for Q4, but said that its own online business performed very strongly in the year as whole, with a currency-adjusted increase of 49%. It also managed to break the €200 million mark with its annual online sales for the first time in its history. 

This was supported by the successful expansion of the company’s online flagship store hugoboss.com to 32 additional markets. 

As mentioned, it expects a gradual recovery to continue this year but said that Q1 will continue to be hurt by Covid restrictions in multiple markets. The real recovery should start from Q2, helping sales and operating profit to rise in 2021.

“Although the pandemic continues to have a severe impact on our business in the short term, I am highly confident when it comes to the further recovery of our business in the course of the year," acting CEO Yves Mueller said.

The company added that it would continue to focus more heavily on the casual styles it has already been pushing in the past year and even before the pandemic started.

That’s the right thing to do, according to analysts. Emily Salter, retail analyst at GlobalData, said that along with using digital to reach new consumers, the company is on the right track. “Despite it being an unpredictable year, the brand still invested in digital marketing methods and new [more casual] collaborations to remain relevant and attract new shoppers in the longer term,” she said. 

And she thinks the casualisation will help it particularly in international markets. “The brand’s reliance on Europe, especially the UK and Germany, hindered its performance in 2020,” she explained. “[But] China is a clear priority market for the brand, with its new focus on sporty streetwear popular in the market, and investment in specific digital marketing techniques will be key here, such as using WeChat”.