November 6, 2018 / 7:16 AM / 10 days ago

Hugo Boss expects strong year end after weather dents profits

BERLIN (Reuters) - German fashion house Hugo Boss (BOSSn.DE) expects a significant improvement in sales and earnings in the fourth quarter after higher markdowns to shift unsold stock in an unseasonally long summer dented profits in the last three months.

FILE PHOTO: Shirts and ties are on display in the Hugo Boss section in the Central Universal Department Store (TsUm) in Kiev, Ukraine May 17, 2017. REUTERS/Valentyn Ogirenko

Known for its smart men’s suits, Hugo Boss has been introducing more casual and sportswear styles to appeal to a younger audience and investing heavily in its online offer.

On Tuesday, it announced a new partnership with online retailer Zalando (ZALG.DE) to strengthen its digital sales, which jumped 38 percent in the third quarter.

Overall, group sales were flat at 710 million euros ($810 million), while earnings before interest, taxation, depreciation and amortization (EBITDA) before special items fell 12 percent to 126 million, both missing average analyst forecasts.

Shares in Hugo Boss fell 2.3 percent in early Frankfurt trade (BOSSn.F).

It said the fall in profitability was mainly due to markdowns to respond to the late start to sales of higher price fall and winter garments due to the long summer in Europe, as well as negative currency effects of 5 million euros.

However, Hugo Boss said a positive business development in October underlined its expectation for a recovery in the fourth quarter, traditionally its strongest in terms of sales, and it reiterated its full-year sales and earnings forecast.

“I’m convinced that we will return to sustainable profitable growth in the coming year,” Chief Executive Mark Langer said in a statement.

Luxury stocks had been under pressure due to concern about a U.S.-China trade spat, but they have rallied in recent days on optimism about a resolution to the dispute and updates from the likes of Kering (PRTP.PA), showing no signs of slowdown in China.

Hugo Boss said quarterly sales in China grew 7 percent, while profits in the Asia/Pacific region jumped 37 percent.

($1 = 0.8765 euros)

Reporting by Emma Thomasson, editing by Riham Alkousaa and Maria Sheahan

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