London: Hugo Boss AG plunged to a nine-year low after cutting its full-year outlook, saying economic uncertainty in North America and political unrest in Hong Kong are crimping sales of the German company’s fashions.
The guidance reduction comes two months after the suitmaker previously lowered its outlook, citing weak sales to tourists and pricing pressure in the US. Now the anti-Beijing protests in Hong Kong, which led to a plunge in visits by mainland Chinese luxury shoppers, are creating a new headache. The stock fell as much as 11% Friday morning.
“Business in Hong Kong has been substantially negatively affected since the beginning of the political unrest and demonstrations,” the company said Thursday in a statement.
The company’s turnaround efforts have gone awry since it replaced its chief executive officer in 2016, as suitmakers struggle to adjust to the trend toward casual office attire. Current CEO Mark Langer set out a plan last year to shift toward a faster-fashion model, speeding up production, personalising its clothes more and boosting e-commerce.
Hugo Boss also expected sales to grow faster in Asia, which has been driving the fashion industry’s sales. Luxury conglomerate LVMH said Thursday that sales in Hong Kong fell 40% in August and September.
Hugo Boss said it expects currency-adjusted sales to increase by a low single-digit percentage this year, down from previous guidance for an increase at the lower end of a mid-single-digit range. Sales in the third quarter were flat from a year earlier.
“We see no end to this pressure, particularly in North America and Europe, from which Hugo Boss is clearly not immune,” wrote Piral Dadhania, an analyst at RBC Europe, slashing his price target by more than a quarter to 50 euros.
The suitmaker also now expects a decline in operating profit to a range of 330 million euros and 340 million euros ($364 million to $375 million). It previously forecast an increase from last year’s 347 million euros.