China slowdown hits luxury firms Boss and Remy

LUXURY brands revised down their profit forecasts yesterday as growth in key Chinese markets continued to slow, dragging shares lower.

Shares in Remy Cointreau dropped 11.6 per cent after the French spirits group warned of a double-digit decline in full-year operating profit because of a slowdown in China, while subdued demand in the country also hit performance at German fashion house Hugo Boss, where shares fell 3.1 per cent after it delayed its 2015 profit target.

Remy, the maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum said it remained confident over the medium and long-term outlook in Asia, notably China.

Operating profit for the six months to 30 September reached €132.7m (£111m), down 7.3 per cent like-for-like from a year ago.

Hugo Boss, meanwhile, abandoned its 2015 profit target as it warned of slowing sales growth in China – following similarly cautious comments from upmarket fashion groups such as LVMH and Burberry.

“A particular concern is China,” Hugo Boss chief executive Claus-Dietrich Lahrs told investors at an event in Hong Kong, adding there was little sign of the country returning to the double-digit percentage sales growth of recent years.

Analysts estimate luxury industry sales will rise around four per cent in China this year, Lahrs said.

The company, best known for its men’s suits, said it was keeping a target to reach sales of €3bn in 2015, but that it would no longer be able to reach a 25 per cent margin on earnings before interest, tax, depreciation and amortisation as a percentage of sales.

Adding to pressure on profits is the fact that Hugo Boss has been growing strongly in the United States, where profit margins are lower than in Asia.

The group also maintained a forecast made at the end of last month for currency-adjusted sales and earnings to rise by between six per cent and eight per cent in 2013.

Related articles