Hugo Boss sees growth picking up after tough first quarter

By Kirsti Knolle

BERLIN (Reuters) - German fashion house Hugo Boss (BOSSn.DE) expects investments in its stores and marketing to deliver a pick up in sales and profit growth over the rest of the year, it said on Wednesday, after posting lower-than-forecast first-quarter earnings.

Net profit fell 7 percent to 75.6 million euros (56 million pounds), missing analysts' average estimate of 82 million, though sales rose 9 percent to 668 million euros, just ahead of the average forecast of 666 million.

Hugo Boss has been spending heavily on expanding its own store network, where sales are more profitable than through other retailers' shops, and on increasing marketing. It is also investing in its womenswear and online businesses.

Its shares were 0.5 percent lower at 107.50 euros at 0806 GMT, underperforming a flat German midcap index MDAX (.MDAXI).

The stock fell last month after the firm cut its 2015 sales target, joining rival luxury goods companies in reporting a drop in spending by Russian and Chinese shoppers.

Hugo Boss said first-quarter sales in China fell 3 percent, adjusted for currency moves.

That "might be a point of investors' concern", said Equinet Bank analyst Ingbert Faust, who has a "reduce" rating on Hugo Boss shares.

China has become a tougher market for luxury brands following the government's anti-corruption campaign and an economic slowdown. Menswear sales in China, Hugo Boss's most important category, fell by 10 percent last year.

Chief Executive Claus-Dietrich Lahrs said Hugo Boss was also suffering from muted consumer confidence in Europe, but it expects growth to accelerate as the year progresses, allowing it to confirm its full-year assumptions.

The firm expects a mid single-digit percentage rise in currency-adjusted sales this year and earnings before interest, tax, depreciation and amortisation (EBITDA), adjusted for special items, to rise 5-7 percent

First-quarter comparable store sales rose 3 percent adjusted for currencies, while wholesale sales fell 2 percent. Womenswear sales were up 4 percent in local currencies compared with a 2 percent increase for menswear.

(Additional reporting by Emma Thomasson; Editing by Maria Sheahan and Mark Potter)