RBC Capital Markets downgraded Hugo Boss to “sector perform” from “outperform,” slashing its price target to €38 from €40. The brokerage cited risks that the German fashion group’s turnaround will take longer than the market expects, leading to a 5% cut in its 2026-27 earnings forecasts.

The downgrade reflects a strategic reset for Hugo Boss, which saw operating margins decline about 300 basis points since 2019 despite a 50% sales growth. The company is now targeting 12% operating margins by 2028, up from an estimated 9% at the end of 2025.

A key challenge is rationalizing wholesale distribution, which RBC expects to fall about 8% in 2026. The analysts noted a potential conflict with major shareholder Saudi Arabia's Public Investment Fund, which is also a wholesale customer. Hugo Boss aims for at least €300 million in annual free cash flow.