Hugo Boss has ripped up its 2015 profit target after joining the ranks of luxury goods companies warning of weaker sales growth in China.
The Asian powerhouse has become a key driver for upmarket brands in recent years but an easing in economic growth and a crackdown on bribery have hit demand.
Hugo Boss, best known for its men’s suits, said yesterday it was keeping a target of sales of €3 billion (£2.5bn) in 2015, but warned that it would no longer be able to reach a 25 per cent Ebitda margin – earnings before interest, tax, depreciation and amortisation as a percentage of sales.
French spirits group Remy Cointreau also reported a slowdown in Chinese demand yesterday, following similarly cautious comments from Glenmorangie-owner LVMH and British fashion house Burberry.
Claus-Dietrich Lahrs, Hugo Boss’ chief executive, described China as a “particular concern”, adding that there was little sign of the country returning to the double-digit percentage sales growth of recent years. He pointed to analysts’ estimates that the luxury goods industry would see sales rise by about 4 per cent in China this year – a figure that still outstrips most other key markets.
Lahrs added: “We are clearly committed to a 25 per cent Ebitda margin target but this will happen after 2015.”
As the firm now sells more clothes directly to customers and is publicising a new womenswear collection designed by Jason Wu – a favoured designer of US First Lady Michelle Obama – Hugo Boss is stepping up advertising and marketing spending.