Hugo Boss Profit Stumble May Make 2019 Target Harder to Hit

(Bloomberg) -- Hugo Boss AG reported a plunge in first-quarter earnings amid a weak U.S. market, a stumble as the German clothing retailer aims for growth this year.

Operating profit fell 22 percent on higher costs related to marketing, online operations and reorganization. Still, the company maintained its forecast for growth at a high-single-digit percentage rate for the full year. The shares fell as much as 4.1 percent, the most in eight weeks.

The quarter is a step back from the progress Mark Langer has made in turning around the suitmaker since becoming chief executive officer in 2016. The earnings drop overshadowed the quarter's 4 percent growth in comparable retail sales, according to Piral Dadhania, an analyst at RBC Europe.

U.S. sales fell 10 percent in dollar terms as demand dropped and competition increased, Hugo Boss said. The company is keeping its target because the factors that slowed down profit were temporary and fixed costs will come back to normal, Langer said. He said he's “very confident” Hugo Boss will deliver on the goal, speaking on Bloomberg Television.

The shares have dropped 23 percent over the past year.

“In light of the expected improving momentum in the remainder of the year and the upcoming dividend payment we consider today's decline of the stock as buying opportunity,” Warburg Research analyst Joerg Philipp Frey said in a note. “The good news is Boss's unabated strong like-for-like sales growth.”

--With assistance from Richard Weiss and Matthew Miller.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, John J. Edwards III

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