Hugo Boss Earnings: Sales and Profits Remained Healthy in 2023, but the Market Is Disappointed

We maintain our fair value estimate of EUR 68 for narrow-moat Hugo Boss as the company reported preliminary results for 2023 in line with our estimates and the company’s prior guidance. Revenue was up 18% for the full year at constant exchange rates and 15% at current exchange rates (15.4% in our models) and EBIT increased by 22%, reaching a margin of 9.8% (9.2% in 2022 and we expected 9.7%). EBIT growth was at the midpoint of guidance (20%-25%), but the market found it disappointing. Hugo Boss' revenue growth, above that of the luxury sector, comes at a cost. Nonetheless, we view the Jan. 16 sharp share price drop, on the back of very decent results, as an opportunity for investors even as we expect top-line momentum to decelerate and a maintainable operating margin of 11%, below management’s target of “at least 12%.”