RBC Capital Markets downgraded Hugo Boss on Monday, moving the stock from an "outperform" to a "sector perform" rating and lowering its price target to €38 from €40. The broker explained the change by pointing to the risk that Hugo Boss's turnaround will take longer than the market currently anticipates.
The retailer is undertaking a strategic reset aimed at defending brand positioning and restoring profitability after a period of rapid expansion that, according to RBC, has weighed on margins. "BOSS is having to take corrective measures, and we think there is a risk that recovery takes longer than the market expects," RBC analysts wrote, emphasizing concern over the pace of improvement.
Forecast adjustments and sales expectations
RBC lowered its earnings per share forecasts by roughly 5% for 2026 and 2027, setting EPS at €2.69 for 2026 and €3.00 for 2027, both below its prior estimates. The brokerage also expects constant-currency sales to decline by about 7% in 2026 as Hugo Boss deliberately pares back wholesale distribution to shore up brand equity.
RBC notes the company's sales base has expanded by approximately 50% since 2019, while operating margins have slipped by about 300 basis points over the same timeframe. Hugo Boss's own target aims for 12% operating margins by 2028, up from an estimated 9% at the end of 2025 — a trajectory that the broker suggests carries higher-than-average execution risk.
Wholesale rationalization at the center of the plan
A central element of the turnaround is a concerted effort to rationalize wholesale channels. RBC estimates that roughly 75% of Hugo Boss's wholesale revenue comes from its top 5% of wholesale customers. The brokerage models an approximate 8% decline in physical wholesale sales for 2026, following an estimated 4.5% decline in 2025.
Hugo Boss is introducing a tiered wholesale framework described as "good, better, best," and intends to reserve premium collaborations, such as BOSS x BECKHAM, for its own retail network. RBC's forecast has wholesale sales falling about 12% across 2025-26 combined before reaching a stabilization point.
RBC also highlighted a potential complication: the company's major shareholder, Frasers Group, holds a direct 25% stake and operates as a wholesale customer across multiple price segments. The analysts said they are conscious that this relationship could create challenges as wholesale distribution is reconfigured.
Cash flow and capital spending outlook
Hugo Boss is targeting at least €300 million in annual free cash flow for each of the next three years, a goal the company expects to support with lower capital expenditure. RBC estimates the reduction in capex will provide a €60-70 million tailwind in 2026, as major investments in stores, logistics and its headquarters are completed.
Valuation and market positioning
On RBC's numbers, the stock is trading at roughly 13 times the brokerage's 2026 earnings estimate. While that multiple sits below the company's historic average, RBC characterizes it as reasonable given the elevated execution risks it now sees. The analysts cited what they view as relatively better value in peer situations, noting Zalando at about 8 times 2026 EV/EBIT on their comparison.
To derive its €38 price target, RBC used a discounted cash flow approach that assumes 2% annual sales growth and 11% terminal EBIT margins.
Market context
The downgrade follows weaker sales trends across several core European markets, including the UK, Germany and France, which RBC referenced as part of the backdrop for its more cautious stance.
Overall, RBC's action reflects a view that the company's reset will involve near-term revenue trade-offs as wholesale channels are tightened to protect longer-term brand value, and that margin improvement targets depend on sustained execution and the successful reallocation of product and channel strategies.