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Despite Short-Term Risks, The Safe Yield Of 7 Percent Makes Hugo Boss A Value Play

Mar. 06, 2020 11:12 AM ETHugo Boss AG (BOSSY)BBRYF, BURBY, EUHMF, LVMHF, LVMUY, PPRUF, PPRUY14 Comments
The European View profile picture
The European View


  • Hugo Boss has reached a price level where it has not been traded for many years.
  • I think a window has opened up for investors where there is an excellent opportunity/risk ratio.
  • The dividend alone, which is covered more than twice by cash flow, attracts with a yield of about 7 percent.
  • The market also does not seem to sufficiently value the progress made by management.
  • Compared to its competitors, Hugo Boss has a very attractive valuation. It is also trading at a large discount compared to its own historical operating performance.


Regarding Hugo Boss (OTCPK:BOSSY), a window of opportunity may have opened up for investors to buy cheaply in the shadow of the macroeconomic uncertainty and high volatility in the markets. In my previous analyses, I have always said that I would wait with buybacks. In general, to be honest, I have been very reserved towards the company and have (only) briefly considered selling outright. However, I still held the shares. This was mainly due to my long-term investment approach and dividends. Even if I thought a small cut was possible here, the expected return was satisfactory enough for me as a cash flow oriented investor. The "conclusion" of my last analysis on Hugo Boss sums up my mindset appropriately.

Hugo Boss is doing better operationally than many expected. Therefore, it was right not to sell my shares. However, the preliminary figures for the fourth quarter reveal that not everything is yet running smoothly at the company. Nevertheless Hugo Boss has the momentum on its side right now. However, I will not buy any new shares, but simply collect the juicy dividend in May. I think a reduction is possible here. But it should not be too high. Hugo Boss may even keep the payout stable.

In the course of the Corona Shock, however, the share price has now approached its multi-year lows again. At present, Hugo Boss is only a very small part of my portfolio. I will continue not to sell. Instead, I am considering using the situation to increase my existing positions. I will explain the reasons for this in this article.

Why a repurchase may make sense now

As a long-term investor, short-term fluctuations in a company's business are not important. Nevertheless, I am considering increasing my shares in Hugo Boss a little. Right now is a good time for

This article was written by

The European View profile picture
Runner of the TEV Blog | Private InvestorI am a long-term oriented investor and in my early thirties. I hold a law degree and a doctorate in law and love investing and talking about my and others' investments. I regularly write about my research and investments on various investor platforms and the TEV Blog. **My articles represent my opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions.**

Analyst’s Disclosure: I am/we are long BOSSY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (14)

Great article and comments. I'm in Europe and new to investing. I have been studying Hugo Boss as my fist investment for a while now.

In 2008 the company came back steadily over a number of years so if I was to invest I would be happy to keep shares for the next 5 to ten years as it currently stands.

The new CEO who will officially take up his position in the summer of 2021 looks to be the right guy at the right time also.

This very detailed article has been hugely beneficial as well as all the comments.

The European View profile picture
Many thank @Trevor Lucey

Please note that Hugo Boss had cut its dividend after this article was published.
Praveen_Chawla profile picture
Don't count on the dividend.
CEO is supporting investment in US flagship stores to help amp up the brand. He visited newly upgraded Chicago store in early March. Glad to see CEO visiting a market with upside potential.
Damir Bobojanov profile picture
Hi, thanks for the article.

BOSS is being slaughtered. For a lot of reasons I guess, the main sales spots are infected Asia and Europe. So devastating 1H is promised for sure.

But, what do you think, has it had enough at current valuation?
Praveen_Chawla profile picture
This appears to a very slow growth company. Also given that it is a retailer free cash flow is not the right metric as its likely to be very variable unless you are adjusting for changes to working capital. What is the sustainability of the dividends? The ADR's only show dividends since 2014.
BM Cashflow Detective profile picture
@The European View
It is a pleasure to read that your conviction has increased at Hugo Boss. (Maybe also because of my comment in your last article about Hugo Boss. ;-) I learned a lot new in your article. That makes me very confident. It really looks like I can really like the company. A small percentage share in an income-oriented portfolio is absolutely appropriate. The holding period should be significantly longer than just beyond the dividend payment day in May.

But what personally annoys me a lot, and that has nothing to do with Hugo Boss. The dividends in Germany are only paid annually. The majority of my portfolio is now invested in the United States. There I receive quarterly dividends, which I can reinvest immediately and regularly. That has become my personal standard. At this point, the annual dividend payment from German companies in the area of ​​income-oriented investors is simply no longer competitive internationally. It is an important aspect for me to think about whether I should sell Hugo Boss and continue to invest my additional capital in the USA.

What are your thoughts on this topic?
The European View profile picture
Thanks for the input @BM Cashflow Detective much appreciated.

As it regards annual payouts, I prefer quarterly payments as well. But in the end, I do not think about that much because both alternatives contribute to my overall cash flow. In any case, the type of payout would never influence my decision in which company to invest.
BM Cashflow Detective profile picture
@The European View
I will think about whether I would like to see it that way and whether this consideration also corresponds to my investment goals.
Many thanks for your response.
Adjank profile picture
Thanks for the article.
Have been considering Hugo Boss since a while but cant get my head around their moat. Compared to a brand like Gucci or Louis Vuitton which are incredibly strong with it seems a loyal following.

Could you comment on that, or is that not something you researched?
Virus turbulence will end. Buy this Corona Dip. Employment report and American medical geniuses, European geniuses and Worldwide geniuses will squash CV19.

Buy this dip. Good times will return. Don't believe the hype of economic collapse. That's laughable. Kurt said buy the dip and keep it a secret. I want to accumulate stocks at bargain prices.
Buy the dip but don't buy a falling knife, that is a dilemma.
BM Cashflow Detective profile picture
Not really. It is crucial that you know the value at which you want to buy.

PE vs Industry: BOSS is good value based on its PE Ratio (12.4x) compared to the Luxury industry average (24.6x).
PE vs Market: BOSS is good value based on its PE Ratio (12.4x) compared to the German market (19.4x).
Price / FCF 6.9, peer median 18.12
FCF margin (%) 17! Peer median 8.87
ROE (%) 20.7, ROIC (%) 9.27, ROA (%) 7.19
Debt Level: BOSS's debt to equity ratio (31.5%) is considered satisfactory.
Reducing debt: BOSS's debt to equity ratio has increased from 27.5% to 31.5% over the past 5 years.
Debt coverage: BOSS's debt is well covered by operating cash flow (182.5%).
Interest coverage: BOSS's interest payments on its debt are well covered by EBIT (17.1x coverage).
7.10% Current Dividend Yield

That is not a dilemma. Don't believe the nonsense of the falling knife. Think like a smart and brave value investor. You get a wonderful income-generating business with a big discount on the fair value. Fear causes you not to buy income-generating assets that you should own. Think of the regular income from dividends.
What are you waiting for?
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