Hugo Boss to Prioritize Cost Control Following Q2 Earnings Decline, Reports Reuters

By Ozan Ergenay and Tristan Veyet

Hugo Boss has confirmed a notable 42% decline in its operating profit for the second quarter, emphasizing its commitment to cost-saving measures to enhance profitability in the upcoming quarters.

The iconic German brand, recognized for its blend of formal attire and casual styles, recently revised its annual projections and revealed preliminary figures that fell short of expectations, largely due to economic and geopolitical conditions negatively affecting global consumer demand.

The luxury industry is currently facing challenges such as declining sales and squeezed profit margins as inflation leads consumers to pull back on spending for designer goods. Additionally, a real estate downturn and job instability in China have intensified these challenges.

Earnings reports from various luxury brands, including industry giants LVMH and Kering, have highlighted the pressures facing the sector, with many companies failing to meet their forecasts.

Hugo Boss has taken proactive steps to improve efficiency and effectiveness throughout its operations, leveraging the organizational framework it has developed over recent years. The CEO, Daniel Grieder, noted that significant potential for cost savings has been identified, particularly in sourcing, and that several measures are already being implemented.

Grieder also indicated that there are no expectations for a considerable rebound in consumer sentiment during the latter half of the year. He reiterated that the company may achieve its 2025 sales target of 5 billion euros, albeit with a slight delay that was previously communicated in March.

By 0915 GMT, the company’s shares had risen by 3.7%, positioning it as one of the standout performers on Germany’s mid-cap index. Analyst Volker Bosse from Baader Helvea remarked that the market has responded favorably to the group’s emphasis on cost efficiency, which increases the likelihood of Hugo Boss meeting its revised full-year targets.

Morningstar analyst Jelena Sokolova noted that investors are likely responding positively to the focus on cost control in light of increasing expenses required to support revenue growth.