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UPDATE 2-Hugo Boss expects better fourth quarter despite weak China
November 3, 2015 / 7:17 AM / 2 years ago

UPDATE 2-Hugo Boss expects better fourth quarter despite weak China

* Optimism for Q4 based on trend seen in October

* Luxury sector struggling in face of slowing Chinese demand

* Hugo Boss own retail sales stable in Q3, wholesale down

* Womenswear sales up in Q3, menswear down (Adds details from conference call)

By Emma Thomasson

BERLIN, Nov 3 (Reuters) - German fashion house Hugo Boss expects strength in Europe to help sales and earnings to a fourth-quarter recovery, it said on Tuesday, though it sees no immediate prospect of a pick-up in China and the United States.

The company said its prediction for a better fourth quarter -- the most important retail period because of the Christmas and New Year holidays -- is on the assumption that sales at its own stores would remain stable or increase, based on the trend it had observed in October.

Other European luxury goods companies, such as Burberry and market leader LVMH, have also been feeling the pressure from China’s slowing growth while a strong dollar has deterred tourists from shopping in the United States.

Hugo Boss said its performance is expected to be particularly strong in Britain in the fourth quarter, but that recent weakness in the United States and China could persist into 2016.

“We expect tough trading to continue to the end of 2015 and possibly also the beginning of 2016,” Chief Executive Claus-Dietrich Lahrs told a conference call with analysts, referring to the U.S. and Chinese markets.

Finance chief Mark Langer said that while sales had fallen 20 percent in China in the third quarter, purchases by Chinese tourists in Europe were up more than 50 percent.

Hugo Boss cut its 2015 sales and profit outlook last month because of the weakness in China and reiterated that on Tuesday, saying it expects sales and core profit to each rise by between 3 percent and 5 percent on a currency-adjusted basis.

Hugo Boss shares were down 1.1 percent at 1400 GMT, against a 0.4 percent decline for Germany’s mid-cap index.

Hugo Boss has been investing heavily in expanding its own retail network, opening a net 64 new stores in the first nine months to bring its total to 1,105, and shifting away from selling its sharp suits wholesale through other outlets.

In the third quarter, sales from its own stores rose 6 percent in local currencies and were stable on a currency-adjusted basis, helped by 20 percent currency-adjusted growth in sales via its website, while wholesale sales fell 7 percent.

Best known for its premium menswear, Hugo Boss has been expanding its clothing for women under the direction of designer Jason Wu, with sales of womenswear up 6 percent in the third quarter in local currencies, while menswear fell 1 percent. (Editing by Georgina Prodhan and David Goodman)

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