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By Bloomberg

German fashion brand Hugo Boss AG forecast 2015 profit below analysts’ predictions as European and Chinese consumers eschew purchases of luxury clothes and accessories. The stock fell the most in a month.

Earnings before interest, taxes, depreciation and amortization and excluding special items will increase by 5 percent to 7 percent this year, Metzingen-based Boss said in a statement. That compares with the 12 percent average growth estimate of 23 analysts surveyed by Bloomberg. Sales excluding currency effects will rise by a mid-single-digit percentage.

Profitability is contracting as Hugo Boss, the purveyor of angular suits and 650-euro ($690) Berlin-brand handbags, invests in taking over more of its global stores amid a cooling in demand. In its annual report released today, Boss cited “weak” spending by shoppers in Europe and a decline last year in luxury goods sales on mainland China as the government quashes expensive gift-giving.

“The shares will be under pressure near-term,” Thomas Chauvet, an analyst at Citigroup, said in a note to clients. He recommends buying the shares and said investors will be watching whether the European market can recover and looking for the success of a push by Boss into women’s wear.

Stock Falls

Boss fell as much as 3.9 percent, the steepest intraday drop since Feb. 10, and was trading down 2.9 percent at 115.55 euros as of 9:29 a.m. in Frankfurt. That pared the stock’s gain this year to 14 percent.

The company is buying stores from franchisees in Asia and the Middle East to capitalize on luxury clothes and accessories demand there as European shoppers curtail high-end purchases. Boss will also likely benefit from a further weakening in the euro, which has the effect of boosting dollar- and Chinese yuan- denominated sales when they’re booked in Boss’s home currency.

Boss’s outlook for about 5 percent revenue growth this year could end up being effectively 9 percent when accounting for currency effects, said Julian Easthope, an analyst at Barclays in London with an equal-weight recommendation on the shares.

“We will again be able to master the macroeconomic challenges this year,” Chief Executive Officer Claus-Dietrich Lahrs said in the statement. “Looking ahead over the next few years, Hugo Boss faces excellent prospects for growth.”

Fashion’s Decline

Fashion retail sales in Germany declined 8 percent in the fourth quarter, according to Kepler Cheuvreux. Goldman Sachs Group Inc. said last month that the European luxury industry will be in “transition” this year, trimming its forecast growth rate and advising clients to sell Boss shares.

Sales last year rose 6 percent to 2.57 billion euros and adjusted Ebitda increased 4.6 percent to 590.8 million euros, Boss said. The company’s maximum 7 percent growth forecast for 2015 indicates earnings of 632.2 million euros, versus analysts’ average estimate of 664.6 million euros.

Investor Permira Holdings further reduced its stake in the German clothier to less than 14 percent last month. Permira has been cutting its Boss holding for the last two years. The private-equity company acquired a majority stake in 2007.