Saturday, December 14, 2013

Analysis of Hugo Boss

 

A German high-end fashion company


Company: Hugo Boss

Business: A German high-end fashion retailer and accessories for both men and women. They have several different brands: BOSS, BOSS Orange, BOSS Green, HUGO and finally HUGO BOSS. The brands consist of business wear, evening wear, shoes and leather accessories. They are also active with licensed fragrances, glasses, watches and other areas they consider to be able to make contributions to.

Active: Due to active marketing the Boss brand is well known in the world and they sell products in 126 countries world wide. Production is in Asia & Eastern Europe. They have more than 6,800 sale points, with 1,200 stores as franchise and Hugo Boss have themselves 840 stores which they currently are expanding pretty heavily.

P/E: 22.4

Comment: Four years ago I bought a Hugo Boss suit for the very first time. It looked excellent and I was very happy with it. Until today I think I have worn it maybe seven times and in the groin the material have already started to be destroyed. For a cheap suit I would not care that much but for a suit that cost 450 € I find this unacceptable and I have therefore decided that I will never buy a Hugo Boss product again. I accept to pay for quality but I refuse to pay for a brand name. Still... the question is how the company is doing? Because everyone does not think and act like I do and many are fully prepared to pay for a brand name.


contrarian values of P/E, P/B, ROE as well as dividend

When you look at this analysis you should also take a closer look at Gerry Weber, H&M, Inditex as well as Abercrombie since they are all fashion retailers even though they turn themselves to slightly different segments.
The P/E of Hugo Boss is too high for me with 22.4 and the P/B is scary large with 10.8! This means that Graham would not have been very interested in it. They do however have an excellent earnings to sales with 13% and the ROE is spectacular with 48%, that is truly amazing! The book to debt is acceptable with a ratio of 0.7. In the last five years they have had a yearly growth of 6.8% which is great and that leads to a motivated P/E of 19 to 22 which means that Hugo Boss today is being fairly valued by the market. They pay a fully acceptable dividend of 3.2% which does however represent almost 72% of their earnings but just like H&M they are paying out a large portion of their profits to their shareholders so unless they have a really bad year I see no reason for why it should be significantly decreased.

Conclusion: Both Graham and I say no to this company but there are many aspects that I do like with them such as that P/E in relation to their growth is fully acceptable, the E/S is great, dividend also ok and the ROE is excellent! I also find it interesting that they start to push out more and The only thing that bring a tear to my eye is that back in 2009 this company could have been bought for 10 euro per share... those were the days!

If this analysis is outdated then you can request a new one.

No comments: