#Textiles & Apparel / Garment
HUGO BOSS records strong Q3 2021 results based on significantly improved momentum
Operational highlights Q3 2021
• Currency-adjusted Group sales grow 40% to EUR 755 million; 7% above 2019 levels
• Momentum in Europe and the Americas accelerates – sales up 9% and 14% vs. Q3 2019
• Strong growth in own online business continues; sales up 127% vs. Q3 2019
• EBIT amounts to EUR 85 million in Q3; 3% above 2019 levels
• FY 2021 outlook: Currency-adjusted Group sales expected to increase by around 40% against the prior year; EBIT expected between EUR 175 million and EUR 200 million
Strategic progress along CLAIM 5
• Digital-driven launch of second BOSS x Russell Athletic collection with one of the largest social media coverages in fashion week history – almost 4 billion impressions in 4 days
• HUGO BOSS Digital Campus fully operational; relaunch of hugoboss.com in early 2022
• Organizational structure further strengthened via important personnel changes
“We look back on a very strong quarter with both sales and earnings exceeding pre-pandemic levels,” says Daniel Grieder, Chief Executive Officer of HUGO BOSS. “We also made first great strides in successfully executing our CLAIM 5 strategy, particularly when it comes to boosting our brands among younger consumers. The spectacular launch of our second BOSS x Russell Athletic collection is a blueprint of how we will fully unlock our brands’ great potential together as a team in the future.”
In the third quarter of 2021, as pre-announced in October already, HUGO BOSS recorded a strong acceleration in its business recovery, with both sales and earnings exceeding pre-pandemic levels for the first time. Group sales amounted to EUR 755 million, representing a currency-adjusted increase of 40% against the prior-year period (Q3 2020: EUR 533 million). In Group currency, this corresponds to an increase of 42%. Consequently, on a two-year-stack basis, currency-adjusted sales were up 7% as compared to the third quarter of 2019 (Q3 2019: EUR 720 million). A global store opening rate of around 95% as well as a meaningful uplift in consumer sentiment – particularly across Europe and the Americas – contributed to strong sales growth in the three-month period. Besides that, the Company successfully executed several key brand, product, and sales initiatives as part of its CLAIM 5 strategy, thereby driving brand relevancy for BOSS and HUGO and leveraging global business opportunities.
Strength in casualwear continues with sales up double-digits versus 2019
Both brands, BOSS and HUGO, posted strong double-digit growth in the third quarter with currency-adjusted sales up 38% and 51% against the prior-year period. Also compared to 2019 levels, sales increased 6% for BOSS and 14% for HUGO, both currency-adjusted. In particular, the brands’ casualwear offerings continued their strong growth trajectory, with BOSS and HUGO each posting double-digit sales increases in casualwear as compared to 2019 levels. Also demand for the brands’ formalwear offerings picked up noticeably in the third quarter, reflecting the reoccurrence of social events over the summer.
Momentum in Europe and the Americas strongly accelerates
With nearly all stores back in operation, Europe and the Americas recorded a particular strong performance in the third quarter. Consequently, as compared to Q3 2020, currency-adjusted sales in Europe increased 38%, translating into growth of 9% on a two-year-stack basis. In the Americas, revenues almost doubled versus the prior-year period, up 94% currency-adjusted, thereby exceeding 2019 levels by 14%. In the Asia/Pacific region, renewed COVID-19-related restrictions – including temporary store closures – weighed on consumer sentiment in various markets. As a result, revenues remained 1% below the prior-year level and 14% below that of 2019.
Strong dynamic in own retail business with double-digit growth vs. 2019
From a channel perspective, currency-adjusted revenues in the Company’s own retail business were up 40% on the prior-year level, translating into growth of 13% on a two-year-stack basis. The Group’s own online business continued its robust performance also in the third quarter of 2021, posting strong double-digit growth versus the prior-year period with currency-adjusted revenues up 37%. Compared to 2019, sales on hugoboss.com and on self-managed partner websites were up 127%, currency-adjusted. In the wholesale channel, currency-adjusted sales also grew 40% compared to the prior-year period. As a consequence, revenues in this channel remained only 1% below 2019 levels.
Strong increase in EBIT in the third quarter
In the third quarter of 2021, HUGO BOSS generated an operating profit (EBIT) of EUR 85 million, well above the prior-year level (Q3 2020: EUR 15 million). This development reflects the strong Group sales development as well as significant operating expense leverage, particularly within own retail. Both effects more than compensated for a slight decline in gross margin, down 20 basis points compared to the prior year, largely reflecting the overall rise in global freight and duty cost. Compared to pre-pandemic levels, EBIT was up 3% (Q3 2019: EUR 83 million).
Free cash flow increased by 10% compared to the prior-year level, amounting to EUR 171 million in the third quarter of 2021 (Q3 2020: EUR 155 million). This development mainly reflects the strong increase in EBIT as well as further improvements in trade net working capital. Compared to 2019 levels, free cash flow generation even more than doubled.
HUGO BOSS raises outlook for the full year 2021
In light of the strong top- and bottom-line performance in the third quarter, HUGO BOSS increased its outlook for the current fiscal year. The Company now forecasts Group sales in fiscal year 2021 to increase by around 40% currency-adjusted (prior guidance: currency-adjusted increase of between 30% and 35%; 2020: EUR 1,946 million), with contributions expected from all regions. EBIT is now forecast to come to a level of between EUR 175 million and EUR 200 million in fiscal year 2021 (prior guidance: between EUR 125 million and EUR 175 million; 2020: minus EUR 236 million).
Strong initial progress in executing the new CLAIM 5 growth strategy
In September, and fully in line with the strong strategic pillar ‘Boost Brands’ of the Company’s new CLAIM 5 growth strategy, HUGO BOSS celebrated the spectacular phygital launch of the second BOSS x Russell Athletic collection. As part of Milan Fashion Week, the physical collection presentation in a baseball stadium featured numerous celebrities including Gigi Hadid, Irina Shayk, and TikToker Khaby Lame, while setting the stage for extensive activation on social media. Several high-profile influencers including Chiara Ferragni, Fedez, and Fai Khadra as well as TikTok sensations Elevator Boys, and Younes Zarou, all shared their experiences of the day. The huge digital buzz created globally made this collection launch the largest social-first event in the history of HUGO BOSS, generating almost 4 billion impressions and over 25 million engagements across all social media channels in only 4 days.
The BOSS x Russell Athletic collaboration not only kicks off a new era when it comes to turning consumers into fans. It also strongly emphasizes the ambition of establishing BOSS as a true 24/7 lifestyle brand by strengthening its position in the crucial casualwear segment. The collection fully lives up to the strong claim that ‘Product is King,’ uniting the unique tailoring expertise of BOSS with the sportswear aesthetic of Russell Athletic and ensuring a clear point of difference in every style offered. The 60 menswear and womenswear pieces celebrate team spirit and were designed to appeal to a whole new generation of BOSS fans around the world. Exceptional collaborations like this will continue to be decisive for creating a buzz among younger consumers and enabling HUGO BOSS to realize the full potential of its brands in the future.
CLAIM 5 also contains a strong commitment to ‘Lead in Digital,’ enabling HUGO BOSS to deliver on its vision to become the premium tech-driven fashion platform worldwide. In this context, execution at the recently established HUGO BOSS Digital Campus – based in Metzingen, Germany and Porto, Portugal – is already in full swing. Intended to further drive the Company’s global e-commerce business, CRM, and tech capabilities, one of the campus’ first priorities is to successfully implement the global relaunch of hugoboss.com, scheduled for early 2022. The new online flagship for BOSS and HUGO will offer various state-of-the-art functionalities, all strongly enhancing the online customer journey and driving traffic as well as conversion. Following a clear mobile-first approach, the Company will establish a best-in-class e-commerce experience. Consumers around the world will also experience both brands in a completely new look and feel, thereby incorporating the new branding refresh for BOSS and HUGO.
Over the last several months, and in accordance with its strategic claim to ‘Organize for Growth,’ HUGO BOSS has further strengthened its organizational structure. A number of personnel changes within the senior management team have been implemented, all aimed at successfully executing CLAIM 5 in the years to come. In sales, Judith Sun, Managing Director Greater China, ensures HUGO BOSS will leverage the full potential of the important Chinese market, while Luigi Boiocchi, Managing Director Emerging Markets and Russia,leadsthe newly created Hub Emerging Markets & Russia. Strengthening the brand organization, KristinaSzász, Senior Vice President Business Unit BOSS Womenswear, drives the realignment of the important BOSS Womenswear business, while Christopher Körber, Managing Director Ticino and Business Unit Lead for Shoes & Leather Accessories, Bodywear & Hosiery, Knitwear, and Shirts, focuses on exploiting the full potential ofseveral key business areas. In marketing, Miah Sullivan, Senior VicePresident Global Marketing & Brand Communications, will strongly contribute to the Company-wide ambition of becoming a top 100 global brand by substantially growing brand value for BOSS and HUGO.
