Hugo Boss Stock Drops 10% on Lowered 2024 Outlook Due to China Demand

Tuesday, Hugo Boss saw its shares drop as much as 10% following a downward spiral in its sales forecast. This highlights ongoing challenges in the luxury fashion industry.

The updated outlook from the German premium brand forecasts annual sales ranging from 4.20 billion euros ($4.58 billion) and 4.35 billion euros. This is an adjustment from the 4.30 billion to 4.45 billion euros previously estimated.

According to a note by Deutsche Bank analyst Michael Kuhn to clients, in its initial second-quarter results, the company reported an operating profit (EBIT) of 70 million euros, which fell hugely short of market expectations by 33%.

Pointing to “persistent macroeconomic and geopolitical challenges,” the company revised its outlook, highlighting China and the U.K. as particularly difficult markets.

In 2023, the premium luxury brand expanded aggressively by boosting marketing budgets and launching 102 new sales locations. However, its share price has dropped this year following warnings of slower sales growth.

At 0710 GMT today, Hugo Boss shares dropped by 9%, marking the brand’s lowest point since April 2021.

Analysts at investment banking and capital markets firm Jefferies wrote, “The critical question now will be whether guidance has been cut enough to de-risk 2024 and provide a clearing event that the stock’s narrative can rebuild from.”

In March, analyst’s forecasts were adjusted due to Hugo Boss’ initial guidance for the year.

Back in May, during the release of its first-quarter results, the company highlighted concerns about declining demand in China and potential shifts in U.S. consumer sentiment leading up to the presidential elections.

This week, several luxury brands have also reported challenges in the Chinese market. Swatch, the world’s largest watchmaker, and luxury conglomerate Richemont both noted lethargic demand. Burberry also reported a profit alert yesterday and announced the cancellation of its annual dividend payment.