(News Bulletin 247) – The overseas brand is losing ground on the Frankfurt Stock Exchange, after revealing an operating result lower than expectations.

Bad stock market weather for more or less high-end fashion and clothing groups at the start of 2024.

The British multi-brand distributor JDSports collapsed by 23% on the London Stock Exchange on January 4, after issuing a resounding profit warning. The luxury group Burberry did the same last week, significantly lowering its adjusted operating profit target. Here again the market did not forgive, the action falling by 5.5% on Friday after the announcement, then by another 5.7% the following session.

Even before the start of 2024, Nike had thrown an icy cold shoulder at sports equipment manufacturers at the end of December, after having lowered its growth prospects, due to seizing up demand.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

A margin below expectations

A certain nervousness is therefore observed among investors in the fashion/clothing sector. And, despite a fairly good performance in terms of sales, the German Hugo Boss was no exception this Tuesday.

The overseas fashion group has published its preliminary results for the fourth quarter of 2023. Over the last three months of the past year, the group’s sales excluding currency effects increased by 13% to 1.18 billion dinars. ‘euros. “In the fourth quarter, brand momentum was fueled by several initiatives implemented throughout 2023, including the successful launch of the fall/winter 2023 collections,” the company explained.

All of the company’s regions contributed to this growth, notably the “Americas” where sales jumped 18% excluding currency effects, while Asia-Pacific saw its revenues increase by 33%. The Europe, Middle East and Africa zone performed a little less well, with an increase in turnover of 7% excluding the impact of currencies.

Operating profit increased by 17% year-on-year in the fourth quarter to 121 million euros for a corresponding margin of 10.3%.

If growth turns out to be right in line with expectations (the consensus was around 13%), a “snag” is observed in the operating margin. Investors were, in fact, expecting an operating margin of 11.1%, or 80 basis points (0.8%) more than the rate published by the company, according to UBS.

An unjustified discount?

On the Frankfurt Stock Exchange, this failure remains in the market’s throat. Hugo Boss shares plunged by 10% at the end of the afternoon.

UBS, however, accepts these results, judging that the company’s recovery remains on track and that its brand dynamics persist, thus resisting economic uncertainties. If the Swiss bank concedes that the group’s accounts are likely to harm its stock, it considers that its stock market discount, of around 20% compared to the retail sector based on expected profits, is unjustified.

“We believe that Hugo Boss continues to benefit from good brand momentum, supported by an improved product offering and broader demographic appeal,” said Royal Bank of Canada.