Hugo Boss’ pre-tax profits crept up by 1% to €437m (£326m) in the full year 2014, despite difficult trading conditions in the fourth quarter, slowed growth in Europe and one-off costs related to the cancellation of a contract with a sales agent in the Middle East.
Sales were up 6% to €2.57bn (£1.92bn), at the lower end of the 6-8% Hugo Boss predicted in November, when it warned of “weakening momentum” across all regions. EBITDA increased by 5% to €591m (£443m) for the full year, again, at the lower end of expectations.
Pre-tax profits were further hit by the €19m (£14m) cost of cancelling the Middle East contract, as well as the consolidation of production facilities.
In the fourth quarter, sales rose by 5% to €684m (£513m), compensating for a decrease in gross margin and higher operating expenditures. EBITDA increased by 6% to €167m (£125m).
Hugo Boss said sales in the Asia Pacific and Europe increased above the group average, however, growth in Europe slowed year on year. Total like-for-like retail sales remained stable during the period, and Boss womenswear continued to perform well.
Claus-Dietrich Lahrs, chief executive of Hugo Boss, said: “In 2014, we demonstrated that we stay on course even in difficult market conditions. While the fashion industry stagnated or even shrunk in many markets, we have clearly grown. 2015 will not become any easier in light of the many economic and political uncertainties, but we are confident it will be another growth year for Hugo Boss.”
Hugo Boss is preparing to regain control of its Asian and Middle Eastern growth markets. From March 2015, the business will cut ties with its franchise partners in Korea and take over all 17 stores there. It will closely manage a further seven duty free locations.
The following month it will take back 21 Boss stores in China, bringing the total number of own retail stores on the Chinese mainland to around 130.
In the Middle East, Hugo Boss plans to establish its own distribution company in the United Arab Emirates in 2015 to take over distribution in the region from January 1, 2016. As a result, its existing agreement with commercial agent Fashion Trading Company SARL, Beirut, Lebanon, will end on December 31, 2015.
Lahrs added: “By assuming complete control of our brand presence in Korea, China and the Middle East, we will be further strengthening our presence in these important growth markets.”
Hugo Boss will announce its audited results for the 2014 financial year next month.