Hugo Boss on the look for China growth as it returns to profit

German fashion giant Hugo Boss returned to profitability in Q3, after having reported losses in Q2, and also said that it was focused on business recovery via digital channels and in China as pandemic-linked uncertainty continues.

Overall, it’s quarterly revenue fell 24% on a currency-adjusted basis to €533 million, which was lower than analysts had expected. But its operating profit was €15 million and that managed to beat analyst predictions. However, it was still down from €83 million a year ago.

The company’s digital and Chinese focus is perfectly understandable given that sales in mainland China rose 27% during the quarter and online sales saw a massive leap of 66% as the company opened 24 more markets to e-tail sales between June and August.

“Supported by the accelerated consumer demand shift towards digital, sales on hugoboss.com and the group’s self-managed offerings on key partner websites recorded strong improvements in both traffic and conversion rates,” it said. The period from July to September marks the 12th consecutive quarter with “significant double-digit online sales growth” for the firm.

And while physical stores remained challenged, the company was upbeat. With the vast majority of its own stores back in operation, the group’s own retail business recorded a “considerably more robust performance” compared to the first half of the year, with its own retail revenues down by ‘only’ 20%, currency-adjusted.

But the quarter clearly wasn’t all about good news. While local demand in key markets picked up noticeably as compared to the previous quarter, sales to tourists continued to suffer from international travel restrictions.

Sales dropped 21% in Europe despite encouraging signs of demand bouncing back in key markets such as the UK and France. The tourism downturn that has had such a big impact on many luxury companies obviously weighed heavily on Hugo Boss.

And like other companies at all price levels, the group has been adjusting its offer to meet the new normal with a bigger focus on casual clothing that had already started before the pandemic hit. The company said that its more youth-focused Hugo label saw casualwear sales down only in mid-single-digits during the quarter.