Hugo Boss Surges As China Rebounds

Hugo Boss Surges As China Rebounds

1. Chinese store sales rise, reversing trend of recent quarter

2. Shares rise 8% in Frankfurt trading, most since August 5

Hugo Boss AG shares rose the most in almost three months after the German suitmaker's sales rebounded in China, providing fresh momentum for its new chief's plan to revive the fashion label after several years of decline. Third-quarter earnings before interest, taxes, depreciation and amortization and other items declined 14% to 144.5 million euros ($159.9 million), the Metzingen-based company, beating the average analyst estimate of 138.5 million euros thanks to deeper-than-expected cost reductions. The stock rose as much as 8% in Frankfurt, the most since August 5.

Chief Executive Officer Mark Langer, promoted from chief financial officer in May to replace Claus-Dietrich Lahrs, has closed failing outlets in China and sacrificed sales at American department stores to ward off discounting as part of a pivot from high-priced luxury to premium menswear such as 500-euro suits. Sales in China increased on a like-for-like basis, reversing the trend of previous periods, while US sales dropped 14%.

"The third quarter has not been an easy one," Langer said. "However, we are on an upward trend in China now. I'm satisfied at how quickly and comprehensively we adjusted our cost structures."

Gross profit margin jumped 20 basis points to 64.7% in the quarter, Boss said. For the year, the margin will be stable versus the previous year, it said. The company's expense reductions will total 65 million euros this year, 15 million euros more than planned.

Sales in Europe fell 2% during the quarter, stung by France, the Benelux countries and Germany, where revenue dropped 10%. Currency-adjusted sales in China were down 4%, but sales in stores open at least a year halted a series of quarterly declines. The Asia-Pacific region contributes 13.5% of overall revenue.