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Sales rise fails to lift profits at Hugo Boss

German fashion house Hugo Boss blamed the departure of senior executives and tough economic conditions for a fall in profits and a decline in domestic sales, despite posting a 2% increase in total sales for the first quarter of 2008.

Sales in Germany – Hugo Boss’s single biggest market – dropped 5% to €99 million (£77.3m) during the first three months of the year, after a “declining German market” led to “restrained” ordering from its wholesale customers.

International sales at Hugo Boss climbed 2% to €510m (£398.3m) but EBIT fell 5% to €94m (£73.4m). Net income also dropped by 7% to €65.2m (£50.9m).

The company blamed the fall on disruption caused by management changes in the first quarter of 2008, which included the departure of Hugo Boss chairman Bruno Salzer at the end of February.

Salzer, who had been on the company’s board since 1995, left the German fashion house following a clash over future strategy.
In its growing North American and Asian markets, Hugo Boss recorded double-digit growth, with sales in North America rising 11% to €76m (£59.8m) and Asian sales up 21% to €58m (£45.3m). Total European sales rose 2% to €265m (£206.9m), with western Europe achieving the highest growth. Sales in the UK fell 3%.

Sales of Hugo Boss menswear rose 1% to €400.4m (£315.5m) from January to March this year, while womenswear sales increased 6% to €65.4 (£51.1m) over the same period.

The company was positive about its retail business and said it planned to open 11 new stores, bringing the company’s portfolio of standalone stores to a total of 298.

Profits from licensing grew by 16% to €12m (£9.4m), with further growth expected for the second half of the year from its recently launched jewellery range.

Hugo Boss’s chief financial officer Joachim Reinhardt said: “Even at the beginning of 2008, Hugo Boss was able to continue its successful path despite a challenging marketplace. For the ongoing trading period we anticipate a currency-adjusted growth in sales between 6% and 8%. We also predict that EBIT should increase by 8% to 10%.”

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