(Bloomberg) -- 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 percent to 144.5 million euros ($159.9 million), the Metzingen-based company said in a statement Wednesday, beating the average analyst estimate of 138.5 million euros thanks to deeper-than-expected cost reductions. The stock rose as much as 8 percent in Frankfurt, the most since Aug. 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 U.S. sales dropped 14 percent.
“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.”
Shares of Boss surged 6.5 percent to 60.39 euros at 10:52 a.m. in Frankfurt. The stock has gained 15 percent since the company reported better-than-expected results in August.
Gross profit margin jumped 20 basis points to 64.7 percent 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 percent during the quarter, stung by France, the Benelux countries and Germany, where revenue dropped 10 percent. Currency-adjusted sales in China were down 4 percent, but sales in stores open at least a year halted a series of quarterly declines. The Asia-Pacific region contributes 13.5 percent of overall revenue.
China Positive
“While the performance in Europe has deteriorated, the U.S. is no worse than expected and China posted positive like-for-like sales in the third quarter,” Claire Huff, an analyst at RBC Capital Markets, said in a note.
Boss reiterated its forecast that full-year earnings will decline by 17 percent to 23 percent and currency-adjusted sales will end the year stable or down 3 percent. The company plans to hold an analyst day Nov. 16, where Langer should reveal more details on his turnaround plan.
“I'm far from satisfied,” Langer said in a conference call with reporters. “That will happen when we return to growth.”
To contact the reporter on this story: Aaron Ricadela in Frankfurt at aricadela@bloomberg.net. To contact the editors responsible for this story: Matthew Boyle at mboyle20@bloomberg.net, Phil Serafino
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