UBS upgrades Hugo Boss to 'buy' on valuation rebound hopes

Investing.comDec 3, 2024 3:32 PM

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Investing.com -- UBS upgraded Hugo Boss (LON:0Q8F) (ETR:BOSSn) AG NA O.N. (BS:BOSSd) to “buy” as it sees company’s downside earnings revision bottomed out with valuation set for a rebound in 2025.

The brokerage expects Hugo Boss shares to benefit from a recovery in consumer spending across Europe, the Middle East, and Africa (EMEA) and North America, which together account for 84% of the company’s sales.

Hugo Boss is positioned favourably in the premium segment, benefiting from its geographic exposure and limited reliance on China, where consumer recovery remains uncertain.

The analysts also noted early signs of stabilization in the broader retail environment, particularly in brick-and-mortar stores, after a challenging 2024. This recovery, coupled with improving spending intentions in the U.S. and resilient demand in Europe, is expected to drive a better sales growth for Hugo Boss in 2025.

Hugo Boss is a bottomed with shares are trading at roughly 9 times 2025 estimated earnings, with UBS sees potential for a re-rating as it expects it to go to 14x by next year.

“We have a more positive view on the premium consumer going into 2025”

The €49 price target reflects a 20% upside, supported by expectations of steady earnings growth and gross margin improvements.

UBS flagged several risks to its optimistic outlook, including potential geopolitical tensions, rising freight costs, or a surge in promotional activity, which could pressure margins. Tariff changes in the U.S. also pose a downside risk to earnings if the company is forced to absorb additional costs.

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