Hugo Boss Earnings: Strong Growth and Margin Improvement, but Inventory Increase a Bit Concerning

We are increasing our fair value estimate for narrow-moat Hugo Boss to EUR 66 per share on expectations for stronger growth and margin progression in 2023 as the company reported a strong second quarter and raised full-year guidance. At current levels shares look fairly valued as we don’t expect double-digit revenue growth to persist over the long term, given slower growth and competitiveness in the premium apparel niche where Hugo Boss operates. Nonetheless, we are impressed by the current strong brand momentum across geographies with 15% currency-adjusted growth in Europe, Middle East, and Africa, 41% in the Asia-Pacific region, and most surprisingly 20% growth in the Americas (16% growth in the U.S.), the region that has been very challenging for most luxury stocks under our coverage this year.