Hugo Boss tanks after issuing profit warning

Shares in luxury fashion chain Hugo Boss tanked on Tuesday after the company said a "challenging" market environment, especially in China and the US, together with the need to continue investing in its growth potential, would "depress earnings"

The iconic firm said it now saw earnings before interest, taxes, depreciation and amortisation falling at a low double-digit percentage rate in year-over-year terms.

Management also said it no longer expected to improve its adjusted operating margings to 25%.

However, it continued to express confidence in its ability to increase sales in the medium-term and to improve its margins again.

"We believe Hugo Boss’ results are important read-across as it shows: (1) The importance of control of distribution as a key measure of brand strength and pricing power (Hugo Boss lost control over the US channel), consistent with our Brands Competitive Positioning framework; and (2) the challenges of transition for brands with too much cost and capital tied in stores while also investing in digital, resulting in lower margins particularly with slower growth," analysts at Goldman Sachs said in a research note sent to clients on the next day.

The broker reiterated its 'sell' recommendation on the stock and lowered its target price from €79.9 to €57.9.

As of 16:29GMT stock in Frankfurt-listed Hugo Boss were down 20.53% to $55.87.