Feb 7 - British menswear retailer Moss Bros said the 16.5 million pounds ($26.6 million) sale of its 15 Hugo Boss franchised stores to Germany's Hugo Boss was a "transformational deal" for the firm.

Moss Bros

Shares in Moss Bros rose as much as 14.7 percent on Monday after the retailer said funds raised from the deal would enable it to operate debt-free and invest in the development of its 120 store Moss chain, Moss Bespoke and suit hire business.

"It makes the business much more simple for us to develop, and in today's world, having that amount of cash on your balance sheet is pretty handy," Chief Executive Brian Brick told Reuters.

Moss Bros shares were up 3.5 pence at 27.25 pence at 0926 GMT, valuing the business at 25.8 million pounds.

"While the transaction pushes out profitability for another year, we believe management is continuing to make the right moves strategically and operationally," said Numis analyst Andrew Wade.

He is forecasting a pretax loss of 3.2 million pounds in the year to end-Jan and a loss of 2.1 million pounds in 2011-12.

Moss Bros, which also trades as Cecil Gee and Savoy Taylor's Guild, will continue to sell Hugo Boss branded clothing.

Hugo Boss said the acquisition extended its brand control in one of its key European markets, raising the number of directly operated stores in the UK to 35. Hugo Boss shares were up 0.34 percent at 56.6 euros.

Moss Bros said sales at stores open over a year increased 7.0 percent over the 26 weeks to Jan. 29 and were up 9.1 percent for the year to the same date, benefiting from movement in the jobs market as people laid off in the recession seek new employment.

"People want to make an impression when they start a new job," said Brick.

With gross margin also performing well, he said he was confident in the outturn for the full year.

By James Davey
(Editing by Mark Potter and Will Waterman)