Hugo Boss & Polo fight back financial gloom

Wednesday, 10 August 2011

Nobody can say that luxury brands are not fighting back recession, with quite successful outcomes so far. Big players in high end fashion such as LVMH, Hermes, Polo Ralph Lauren or Hugo Boss, just to mention a few, are facing the economical struggle and posting stronger than ever quarterly figures.

Amidst fateful days for stocks markets, a handful of fashion companies are posting strong 2Q results, even raising their forecasts, as Polo Ralph Lauren and Hugo Boss respectively did on Wednesday. Macy´s and sister company Bloomingdale´s are also set to release quarterly results Thursday before Wall Street opens, and according to market sources, the luxury department store chain's profit will also be above expectations.

"If we don't get a recession, Hugo Boss is on track to raise its midterm target," a source close to Hugo Boss told Reuters. Therefore, Hugo Boss is set to raise its 2015 profit margin target this fall, helped by the vigour of the global luxury market and improved productivity, sources close to the German fashion brand said. The men's suits maker has already met its 2015 underlying profit margin target.


On Wednesday, Hugo Boss shares, which have gained 22 percent since early January, were up nearly 7 percent at 67.88 euros, outperforming the DAX index of German blue chips which was up 2 percent.

In the meantime, Polo Ralph Lauren Corporation reported net income of $184 million, or $1.90 per diluted share, for the first quarter of Fiscal 2012, compared to net income of $121 million, or $1.21 per diluted share, for the first quarter of Fiscal 2011.

"We are a world-class company that has been built on quality and timeless design with a long-term view," said Ralph Lauren, Chairman and Chief Executive Officer. "The clarity of our luxury lifestyle positioning runs through all that we do, from design to marketing to our in-store presentations. We are leveraging this clarity of vision and purpose with an expanding range of merchandise and store environments around the world. We know our customers well and we are committed to offering them the best of the World of Ralph Lauren. The consistency of our approach has supported our strong financial performance and the momentum of our brand worldwide is tremendous," Mr. Lauren added.

Net revenues for the first quarter of Fiscal 2012 increased 32% to $1.5 billion from $1.2 billion in the comparable period last year thanks to strong, double-digit gains in both wholesale and retail segment sales and favorable foreign currency effects. Following the cheerful trend, gross profit for the first quarter of Fiscal 2012 increased 35% to $962 million from $712 million in the first quarter of Fiscal 2011, and the gross profit rate expanded 120 basis points to a record high of 63.0%. The higher gross profit rate reflects favourable channel and geographic mix that was partially offset by cost of goods inflation.

“We enter the Fall and Holiday selling seasons concerned about macroeconomic uncertainty and cost of goods inflation, but we are confident in the strength of our brands, the appeal of our products and the operational discipline of our organization as we navigate through these near-term challenges, " foresaid the American designer in a note to investors on Wednesday.

As to back the luxury brands fight against recession, Hermes shares have been climbing relentlessly since May on speculation LVMH could launch a takeover. The stock reached another high on Tuesday of 242 euros, valuing Hermes at 25.4 billion euros ($36.8 billion).

Unfortunately, market turmoil weighted the FashionUnited Top 100 Index trade yesterday, sending the international fashion benchmark index down by 1.59 points to a 1,212.9 close.

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