Hugo Boss surprise turnaround sends shares skyrocketing

Hugo Boss has welcomed a nine per cent rise in share prices following an announcement that its full-year profits would be far better than expected.

Following two separate profit warnings over a tough 18-month period in which its chief executive Claus-Dietrich Lahrs jumped ship, the retailer is beginning to see progress in its turnaround strategy.

Mark Langer, who was instated as chief executive when Lahrs departed in May, declared he would be moving away from the suit makers‘ push into luxury fashion and instead turn efforts to its more stable and core suit business.

This turnaround strategy was expected to take longer than it has, leading Langer to issue a financial forecast in November preparing investors for a 17–23 per cent drop in profits before tax on the £522.36 million made in 2015.

READ MORE: Hugo Boss struggles amid “challenging” fashion market

Unexpectedly, Monday saw Langer issue a statement revealing that its fourth quarter results saw profits down just three per cent on the year before bringing sales for the year to £2.39 billion, just four per cent less than 2015.

The announcement sent shares skyrocketing and Langer stated: “Fourth-quarter results underline that we are on the right track.

“In China, we completed the turnround in the second half of the year. In Europe, we held up well in a difficult market environment.”

RBC Capital Markets analyst Claire Huff had a slightly less optimistic view than many investors, predicting the retailer will not see profit growth until at least 2018.

“We still believe that Boss faces a number of structural challenges in regard to its overall brand and price positioning. The US also shows no imminent sign of recovery,” she said.

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