German fashion house Hugo Boss said on Tuesday it was focused on driving a recovery of its business online and in China and tapping into the trend for more casual fashion that has been accelerated by the coronavirus pandemic.
“We have a lot more to offer than the classical suit,” acting Chief Executive Yves Mueller told journalists, noting that customers were increasingly mixing formal and casual items, such as wearing a suit jacket with a T-shirt and sneakers.
After slumping to a loss in the second quarter, Hugo Boss swung back to a third-quarter operating profit of 15 million euros ($17.52 million). That was slightly ahead of average analyst forecasts, even though revenue fell by a currency-adjusted 24% to 533 million euros, missing a consensus for 553 million.
Mueller said casualwear is more profitable than the company’s core business of selling smart men’s suits.
Hugo Boss shares were the biggest gainer on the German mid-cap index, rising 6.35% by 0935 GMT.
Online sales jumped 66% in the third quarter, as Hugo Boss launched ecommerce in 24 more markets, with another 12 countries to be added in 2021. Mueller said the company was on track to meet its target for 400 million euros of online sales by 2024.
He declined to give a full-year outlook as parts of Europe close stores again during new lockdowns to stem the spread of the coronavirus. However, he was upbeat about ecommerce and China, where he said business was excellent in October.
Third-quarter sales in mainland China rose 27% from a year earlier. China currently accounts for about 7% of group sales, less than many rivals.
“That is why we want to go full speed ahead,” Mueller said.
Hugo Boss showcased sportier and younger styles with a livestreamed show during Milan fashion week in September, also heavily promoted in China, while many limited-edition casualwear items co-designed with British boxer Anthony Joshua sold out.
However, Harry Barnick, analyst at research company Third Bridge, sounded a note of caution: “There is a risk that the casualisation strategy alienates the existing customer base if execution is poor.”
Reporting by Emma Thomasson; editing by Thomas Seythal, Maria Sheahan and Susan Fenton