Feb 4, 2015
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Hugo Boss earnings fall short on weak consumer mood

Feb 4, 2015

German fashion house Hugo Boss has reported lower-than-expected pretax earnings, citing a weaker consumer mood and taking one-off charges due in part to an overhaul of its Middle Eastern distribution network.

In an unscheduled release of preliminary full-year results, it said pretax earnings edged 1 percent higher to 437 million euros ($501 million), missing the average analyst estimate of 470 million after 19 million in one-off charges, mainly due to severing ties with a Middle East sales agent and the planned consolidation of its production facilities.

Sales rose 6 percent to 2.57 billion euros ($3 billion), slightly missing an average estimate of 2.59 billion, according to Thomson Reuters data.

The group also said its business environment had deteriorated significantly in the fourth quarter compared with the previous quarters.

Its shares dropped 4 percent at 0830 GMT, the biggest decliners in Germany's MDAX of mid-range stocks, which was nearly unchanged.

"Topline performance did not accelerate post-October as we had hoped," UBS analysts said in a note to investors.

Hugo Boss added it would take full control of its Chinese, Korean and Middle Eastern stores from its partners to strengthen its retail operations in key emerging markets.

As part of the move, it will take over 17 stores from its Korean franchise partner TDCo from March 1 and its 21 Chinese stores operated by Wenzhou Noble from April 1, taking the number of stores it operates on the Chinese mainland to 130.

It also canceled a cooperation contract with a Beirut-based fashion trading agent to gain full control over the planned expansion of its distribution network in the Middle East. It declined to disclose financial terms of the transactions.

The group, which hired designer Jason Wu for its womenswear business, expects the transactions in Korea and China to contribute up to 1 percent to sales growth in 2015 and to have a positive effect on its operating profit.

It is due to release detailed 2014 results on March 12.

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