BERLIN Hugo Boss (BOSSn.DE) said it expected sales to stabilise in 2017 and profitability to start to recover as the struggling German fashion house managed to turn its business around in China after slashing prices there.
Luxury players such as LVMH (LVMH.PA), Cartier owner Richemont (CFR.S) and British brand Burberry (BRBY.L), have also signalled better demand in mainland China in recent months as well as improving tourist spending elsewhere.
Since taking over as Hugo Boss chief last May, Mark Langer, the group's former finance chief, has been cutting costs by renegotiating rents, shutting stores, trimming brands and shifting marketing spending back to menswear.
He is returning Hugo Boss to its roots selling smart men's suits, reversing the course of predecessor Claus-Dietrich Lahrs who sought to make the premium label more of a luxury brand and invested heavily in promoting its womenswear.
Lahrs quit last February after sales slumped in China and the United States.
Hugo Boss said it had saved more than 100 million euros (86.68 million pounds) in costs and investment in 2016 and it would continue to keep a strict control on expenses in 2017, helped by renegotiated rents and the closure of loss-making stores.
Langer has also slashed prices in China to bring them closer to European and U.S. levels, helping sales there rise by almost 20 percent on a like-for-like basis in the fourth quarter.
Hugo Boss said it expected currency-adjusted sales to be stable in 2017 after it reported a 4 percent fall in 2016 to 2.69 billion euros ($2.84 billion), in line with average analyst forecasts.
It expects net income and earnings per share to rise by a double-digit percentage rate in 2017 after net income fell 39 percent to 193.6 million in 2016.
($1 = 0.9489 euros)
(Reporting by Emma Thomasson; Editing by Maria Sheahan)