UPDATE 2-Hugo Boss sees China sales improving this year

Thu Mar 14, 2013 8:59am GMT

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* Sees 2013 group sales, profit up by high single digit pct

* Says China market to gradually improve

* Eyes eastern Europe, U.S. growth in 2013

* Dividend up 8.3 pct

* Shares fall 2.2 pct (Adds comment from CEO, share price reaction)

By Victoria Bryan

METZINGEN, Germany, March 14 (Reuters) - German fashion house Hugo Boss said it expected stronger sales in Asia this year, helped by a rebound on the China market, which stuttered last year.

"With a new government in place, with big investment plans, we see a gradual improvement in China in 2013," Chief Executive Claus-Dietrich Lahrs told Reuters Insider television, adding that the brand's presence in the region would be helped when it hosts a fashion show in Shanghai at the end of May.

Hugo Boss, best known for its sharp suits, said its sales in China rose just 4 percent in 2012 after like-for-like sales, which strip out the effect of new store openings, had fallen in the second and third quarters of 2012.

The upbeat comments on China echo a similar view from watchmaker Swatch but contrast with luxury jewellery and watches group Richemont, which said in January sales growth had ground to a halt in the Asia-Pacific region.

For the group as a whole, Hugo Boss expects sales and core earnings to rise by a high single digit percentage in 2013, slower than in 2012 but still faster than growth predicted for the luxury market as a whole.

That outlook disappointed some analysts, however, and the shares, which have risen 19 percent over the last year, were down 2.2 percent at 88.25 euros by 0857 GMT.

The consensus market forecast before the results was for core profits to rise 10 percent in 2013 to around 583.6 million euros and sales to rise 7 percent, according to Thomson Reuters I/B/E/S Estimates.

RUSSIAN, U.S. GROWTH

Growth will come in particular from eastern Europe, where Hugo Boss will focus on opening its own new stores in Russia, and from the United States, where demand for its European-styled suits and shirts resulted in a 15 percent rise in sales last year.

Consultancy Bain has forecast growth of 4 to 6 percent a year for the luxury market through 2015, after 10 percent in 2012, as growth in China, which has been driving the luxury market, slows.

Hugo Boss had already reported forecast-beating preliminary results for 2012 last month, with sales up 10 percent on a currency-neutral basis to 2.35 billion euros ($3.04 billion) and a 13 percent rise in earnings before interest, tax depreciation, amortisation (EBITDA) and special items of 529 million.

The company, which is controlled by private equity investor Permira, also said it was on track for its medium-term target to increase sales to 3 billion euros and core profit to 750 million euros in 2015.

It increased the dividend for 2012 to 3.12 euros per share from 2.88 euros paid last year. ($1=0.7722 euros) (Editing by Greg Mahlich)

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