Hugo Boss sales helped by online, Europe recovery

German fashion house Hugo Boss reported second-quarter sales that rose more than expected due to a rebound in Europe and last year's relaunch of its website, although higher rebates weighed on its gross margin.

Net profit rose 13 percent to 71 million euros ($78 million), slightly ahead of analysts' average estimate of 70 million. Sales rose 16 percent to 647 million euros, well ahead of the average forecast of 631 million.

Hugo Boss said on Tuesday strong sales were driven by Europe, which saw currency-adjusted growth of 7 percent, as sales in Britain rose at a double-digit rate and also picked up in most other countries on the continent. Online sales rose a currency-adjusted 34 percent helped by the revamped website.

"Because of our strength in the European market, we expect the favourable trend to continue in the second half, even though conditions in the USA and China remain difficult," Chief Executive Claus-Dietrich Lahrs said in a statement.

The luxury sector, which has been suffering from lower demand in China due to an anti-corruption campaign and economic slowdown, is showing signs of recovery elsewhere with other brands like LVMH and Kering's Gucci also reporting stronger sales.

Hugo Boss's strategy of investing in expanding its own store network, is also paying off, with currency-adjusted sales in its own stores up 12 percent, while wholesale sales fell 3 percent.

That helped support profitability as it earns more from sales in its own stores than through other retailers' shops, but higher rebates and negative inventory valuation effects dented the gross margin to 66.5 percent from 66.7 percent.

It said that meant the rise in its gross profit margin was likely to be lower than originally expected but confirmed it 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.

It also slightly lifted its expected capital expenditure target for the year to 220-240 million euros from a previous 200-220 million.