Hugo Boss ups 2015 targets on Chinese growth

FRANKFURT Tue Nov 8, 2011 2:30pm GMT

A man looks at a shop window outside the Hugo Boss showroom inside a shopping mall in Mumbai August 23, 2011. REUTERS/Danish Siddiqui

A man looks at a shop window outside the Hugo Boss showroom inside a shopping mall in Mumbai August 23, 2011.

Credit: Reuters/Danish Siddiqui

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FRANKFURT (Reuters) - German fashion house Hugo Boss AG BOSG_p.DE sharply raised its earnings outlook for 2015 on Tuesday as it increases its network of stores and eyes strong growth in China.

The group, best known for its men's suits, said it now expects sales of 3 billion euros (2.5 billion pounds) in 2015 and core earnings of 750 million. That compares with previous targets of 2.5 billion in sales and 500 million in core earnings.

"All of those driving elements we defined at the end of 2009 and the beginning of 2010 are playing out more strongly than we expected," Chief Executive Claus-Dietrich Lahrs told analysts at an investor day.

Concerns that luxury demand was waning hit luxury stocks in September, but companies such as Burberry Plc (BRBY.L) and LVMH (LVMH.PA) have since released confident outlooks.

Hugo Boss shares, which have gained 18 percent in 2011, were up 7.2 percent at 71.26 euros at 1322 GMT, having risen as high as 73.00 euros -- their highest in some six weeks.

"Experts believe growth in luxury will slow in 2012 compared to 2011 but we are confident we can grow more strongly than the competition," finance chief Mark Langer said.

Hugo Boss said it expected sales in Asia to almost triple by 2015 compared with 2010, mainly thanks to China, and that they would account for around 21 percent of sales by 2015.

The group also said around 55 percent of its sales would come from its own retail business in 2015 and that it planned to open about 50 new stores a year.

"If you want to become important in Asia there is no alternative than to do business at your own risk, with own stores," Lahrs said, adding that retail expansion would account for the majority of investment over the next three years.

As at the end of September, Hugo Boss operated 591 of its own stores. Sales via its own retail business, which includes online and outlets, accounted for 40.4 percent of sales in the first nine months of 2011.

NEW STORES

"We want to make two thirds of our sales from own retail," Lahrs told investors. "We will do this by opening new stores and also taking over franchise partners."

Hugo Boss earlier this year bought 15 franchised stores from UK retailer Moss Bros (MOSB.L) and said on Tuesday it expected to take over 10 stores in Taiwan in 2012.

Sportswear and womenswear are also becoming more important for Hugo Boss. "The Chinese are looking out for great sportswear, they look for something branded," Lahrs said, highlighting the group's sponsorship activities with sports such as golf, Formula 1 and sailing.

For the first time, Hugo Boss has also set up a separate organisation for womenswear, appointing Eyan Allen as creative director, and said it wanted to work more on catching up in women's shoes and accessories.

But Lahrs dismissed talk that the group, which has shortened the time it takes to develop its collections, wished to compete more with Inditex's (ITX.MC) Zara and with H&M (HMb.ST) in the fast-moving younger fashion market.

"What's great about them is they create the fashion desire amongst the young clientele," he said, adding that some of these consumers would turn to premium brands later on.

"But we sell premium luxury products at superior prices and our system will never be up to creating fast fashion every month."

(Reporting by Victoria Bryan; Editing by Erica Billingham)

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