On Wednesday, Morgan Stanley adjusted its stance on Hugo Boss shares, downgrading the stock from Overweight to Equalweight and reducing the price target to EUR45 from EUR65. The firm's analyst cited several reasons for the revision, including a less optimistic outlook from a luxury conference held in May and a general subdued demand in the luxury sector.
The downgrade comes as the market anticipates Hugo Boss' second-quarter update, which is scheduled for release on August 1, 2024. Morgan Stanley's revised perspective reflects concerns over industry-wide challenges, noting that despite a strong management team and brand momentum, Hugo Boss is not expected to be shielded from the tough retail environment.
The report acknowledged Hugo Boss' positive attributes, such as its wholesale channel dynamics and margin efficiencies. However, the anticipated pressure on brick-and-mortar retail sales and potential operational expense deleverage led to a cautious forecast.
Morgan Stanley now expects Hugo Boss to report an EBIT of €430 million for FY24, down from the consensus of €441 million, and €469 million for FY25, a decrease from the expected €533 million.
Despite the current low investor sentiment and what Morgan Stanley considers a supportive valuation, the firm has decided to adopt a more neutral position on Hugo Boss shares. The revised price target and stock rating will remain in place until there is clearer evidence of improved retail sales momentum for the company.
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