RBC highlights improved execution and cost efficiency at Hugo Boss

Investing.com -- RBC Capital Markets said Hugo Boss (ETR:BOSSn) is showing stronger execution in 2025, with a clear focus on cost efficiency and tighter operational control, in a note dated Monday. 

The brokerage noted that operating expenses grew only 1% over the past 12 months, even as cost inflation continued across the premium apparel sector. 

It expects further savings in the second half of the year from store portfolio rationalization, including rent negotiations and underperforming store closures, as well as from administrative cost reductions.

RBC flagged that the gap between Hugo Boss’ constant currency sales growth and expense growth has widened again after narrowing in early 2024, when sales growth slowed. 

The improvement signals what analysts described as better operational grip at a time when many peers continue to face margin pressure.

Financial metrics point to steady progress. Hugo Boss’ gross margin is forecast at 62% in 2025, up from 61.8% in 2024. 

The EBIT margin is projected to increase to 9.1% in 2025 from 8.4% a year earlier, with further gains to 10.2% by 2027. 

Adjusted EBITDA is expected to rise 6.3% this year to €535 million, while net income attributable to equity holders is set to increase to €235 million in 2025 from €213 million in 2024. 

Earnings per share are forecast to climb 10.1% to €3.41 this year, with a three-year compound annual growth rate of 10.5% through 2027, higher than several global peers.

RBC pointed to early signs of topline stabilization. Sales in Germany and France returned to growth in the second quarter, while the U.S. market showed modest recovery. 

July data also reflected improved momentum, with apparel sales accelerating in the U.K. and U.S. airport footfall rising, which analysts view as an indicator of improving consumer activity. 

Hugo Boss is also expected to benefit from moderate global price increases in the second half, which should help support gross margins. 

Its exposure to U.S. tariffs remains limited, with about 4% of U.S. imports sourced from China.

The brokerage described the stock’s valuation as undemanding. Hugo Boss trades at roughly 12x 2025 estimated earnings, more than 50% below the broader luxury sector, compared with a historical average discount of 33%. 

RBC said part of the valuation support comes from Frasers Group, which has steadily increased its position in the company. 

Frasers now holds a direct stake of about 25% and an additional 30% through derivatives, making it the largest level of exposure in the past five years.