Payback time for Hugo Boss after tough 2009

UPMARKET fashion house Hugo Boss expects its core profits to grow faster than sales this year, as restructuring efforts gain traction.

• Claus-Dietrich Lahrs

Faced with a global downturn in consumer spending, the German firm has had to close underperforming stores, renegotiate contracts with suppliers and halt deliveries to high-risk customers in eastern Europe. At the same time, it has been pushing into a number of new markets.

As a result, the group – founded in 1924 – expects this year's earnings before interest, tax, depreciation and amortisation (Ebitda) to grow faster than sales, which it sees rising slightly.

In February, Boss, perhaps best known for its male suits and accessories but which also produces a range of womenswear, reported a 6 per cent drop in 2009 underlying Ebitda to 270 million (240m) on sales of 1.56 billion, down 7 per cent.

It expects internet-based sales to top 100m by 2015 as it expands its online presence beyond Europe to include China, the US and Japan.

Having launched its internet business in the UK last year, Germany's largest clothes manufacturer has added web stores in its home country, France, the Netherlands, Belgium and Scandinavia.

In an interview with Bloomberg, chief executive Claus-Dietrich Lahrs described progress at the online business as "very satisfying".

The firm, in which private equity group Permira holds 88 per cent of the voting rights, trades at about 15 times projected 2011 earnings, while Polo Ralph Lauren and Burberry are at a multiple of about 18. Analysts blame lower visibility and sweeping management changes following the 2007 takeover by Permira for the discount.