Hugo Boss lowers annual outlook on weak demand, higher expenses

Nov 2 (Reuters) - German fashion group Hugo Boss cut its outlook for annual sales and operating profit on Monday, citing weak consumer demand and depreciation expenses tied to its IT assets.

The downgrade comes as Hugo Boss grapples with sluggish demand linked to macroeconomic uncertainty and geopolitical tensions while pursuing measures to boost profitability and efficiency.

The retailer of men's suits and casualwear now expects group sales to decline in the high-single-digit percentage range in 2026, versus its previous forecast for a mid- to high-single-digit decline.

Earnings before interest and taxes (EBIT) is now expected to range between €250 million ($280.15 million) and €300 million for the period, compared with an earlier forecast of €300 million to €350 million. It expects higher non-cash depreciation and amortization on IT assets due to AI and technology developments.

In the third quarter, the firm's revenue decreased 4% to €946 million, while EBIT was down nearly 15% at €81 million. Gross margin expanded by 220 basis points to 63.3%.

The retailer now expects capital expenditure of 4% to 5% of group sales this year, compared with its earlier forecast of about 4%.

Hugo Boss, which is set to become a subsidiary of Mike Ashley-controlled Frasers after the British retailer raised its stake to more than 50%, will publish its full third-quarter results on Tuesday.

($1 = 0.8924 euros)

(Reporting by Anusha Shah in Bengaluru; Editing by Shailesh Kuber and Sherry Jacob-Phillips)