Hugo Boss Drops Most in Five Months as U.S. Revenue Slumps

(Bloomberg) -- Hugo Boss AG shares fell the most in five months as weakness in the U.S. kept the German clothier's sales revival in check.

U.S. sales declined 7 percent, the company said Wednesday, after it stopped selling goods to outlet stores that carry different brands at discounts. The shares fell as much as 6.4 percent in Frankfurt, the steepest intraday decline since Nov. 16.

Boss is seeking to revive under the leadership of Mark Langer, the former finance chief who was promoted to chief executive officer a year ago. In November, Langer said the company will return to growth in 2018 as it eliminates brands, slows down store expansion and sells more apparel online. Hugo Boss has limited distribution in the U.S. to the likes of Bloomingdale's Inc. and Nordstrom Inc. after discounting in the wholesale market there led to a loss of pricing power.

The quarter was characterized by “difficult trading conditions in key markets and continued e-commerce disruption,” Citigroup analysts Thomas Chauvet and and Silky Agarwal said in a note.

Langer said the company failed to offer enough entry-level products especially in its e-commerce business, a lapse the company is trying to make up for. Overall, the U.S. business is still “very much driven by discounts also outside the outlet stores, and we have some homework still to do, also within our collections, to bring back brand desirability,” the executive said.

While business in the U.S. will improve during the year, the Americas will remain a region with weaker development in 2017 compared with Asia and Europe, Langer said.

The company is also closing unprofitable stores after doubling its shop network between 2010 and 2015.

Comparable sales at the company's own retail stores worldwide declined 3 percent, the same rate as in the fourth quarter last year. Currency-adjusted sales rose 1 percent.

--With assistance from Heather Burke

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Paul Jarvis, Thomas Mulier