First Burberry, Now Hugo Boss? The Luxury Fashion Tire Fire Continues.

Yesterday, I mentioned Burberry and their luxury purses, draining funds faster than an ice cream cone on a hot summer day, remember? Well, guess what? Hugo Boss just decided to crash the luxury sector’s pity party and things are getting ugly. 

The German fashion giant's shares sank to their lowest levels since 2021 after they slashed their profit guidance for the year, blaming weak demand in key markets like China and the UK.

Hugo Boss, known for its sharp suits and high-end fashion worn by the Kardashians all the way to Tom Brady’s ex-wife, now expects an operating profit between $381 million and $468 million in 2024, down from a previous range of $468 million to $517 million. 

(Source: Hugo Boss)

They also lowered their sales expectations, which isn’t great when you’re trying to sell fancy clothes to people now working from home in pajamas. In pre-market trading, shares plummeted as much as 11%, hitting the lowest level since April 2021. And at the time of this writing, the stock is down nearly 6% at $8.57. Hugo Boss is having a harder time staying upright than a drunk uncle at a wedding.

This news is a major setback for CEO Daniel Grieder, who took the reins in June 2021 with a vision to revamp the clothing range and attract younger shoppers. Grieder, previously with Tommy Hilfiger, must be feeling the pressure as this is the first time Hugo Boss has cut its full-year guidance under his leadership. Maybe he should have stuck to designing polos.

(Source: Hugo Boss)

On the bright side, negative press is nothing new for Hugo Boss. After all, this is the same brand that had to apologize for its affiliation with the Nazi party and using forced labor just last year. 

Despite its checkered past, Hugo Boss managed to reinvent itself as a symbol of high fashion. But now, it seems they’re back in a jam—and not the sweet, spreadable kind if you know what I mean.

Thomas Chauvet, an analyst at Citigroup Inc., noted that after three years of nearly flawless execution and consistently high market expectations, is now struggling to sell their high-end casual clothes. And expectations on Wall Street for this to improve aren’t getting much better. The luxury sector as a whole is having an earnings meltdown worse than my 1-year old son when I change the tv from Bluey to the game.

Remember our chat yesterday? Well, Burberry Group is still in a freefall. After Monday's 16% disappointing suprise, the UK trench-coat maker suspended its dividend, swapped out its CEO, and hinted at a potential loss for the first half of the year. Over at Swatch Group AG, things aren't looking much better. Their shares took another hit after a 9.8% drop on Monday, driven by plummeting sales and a 70% slump in operating profit. I've got a feeling this domino effect is just getting started.

Back to Hugo Boss. CEO Daniel Grieder had a classic CEO moment, saying, "We're operating in a period of significant global macro uncertainty, which also affected our performance in the second quarter. Although the timing of any macro recovery remains uncertain, our strategy of consistently investing in our strong brands, BOSS and HUGO, gives us confidence in our ability to continue driving above-trend growth and capturing further market share." 

In other words, just like Burberry, "We're just going to keep spending money on models and celebrities wearing our clothes and hope everything magically gets better." But as of right now it seems to me like investors are the ones spending money considering the stock has lost 49% over the last year.

Stock.News does not have positions in companies mentioned.