Hugo Boss loses 6% amid Q3 earnings report pressured by falling China demand📉

Despite better data from China, which tends to support sentiment in the European luxury goods sector (battered, by weakness in Chinese consumers), Hugo Boss (BOSS.DE) shares are losing nearly 5% today, and weakness is evident in the broader fashion sector on the Old Continent. The company's Q3 annual sales growth rose very little from €1.027 billion in Q3 2023 to €1.029 billion today. The company reaffirmed previous cautious full-year forecasts, which disappointed investors hoping for an upward revision. 

• Quarterly net income fell to €55 million, down from €63 million in Q3 2023 (€0.79 per share vs. €0.91 in the previous quarter); EBIT fell to €78 million, down from €88 million in Q3 2023, and operating profit posted a 7% y/y decline. 
• Hugo Boss pointed to dormant demand in China as the reason for the cyclical weakness. However, investors see a broader problem in the 'affordable fashion' sector, which has lost 'pricing power' as inflation evaporates and consumer habits change.
• A number of critics in the sector suggest that some companies have made the mistake of creating lines of apparel and footwear, at lower prices, over-engineering their brands. Given this backdrop, investors see a perpetuating risk of lower valuation multiples in the fashion sector. Still, brands such as Hermes (RMS.FR), and Brunello Cuccinelli (BC.IT), which have not entered the 'commercial' sector and maintain high prices for a limited number of products, remain relatively resilient.

Hugo Boss stock price chart (H1 interval)

Source: xStation5

Along with Hugo Boss shares, French fashion holding Kering (KER.FR), whose shares are losing almost 1.5% today, is recording another decline. The company's shares are near 2016 lows.

Source: xStation5