METZINGEN, Germany — It’s not every chief executive officer who can take a visitor on a precisely detailed walkthrough of their company’s latest fashion collection. Especially when, as at Hugo Boss, there are nine of them, if you count the Hugo Boss Black, Orange, Green and Hugo men’s and women’s ranges separately. (Hugo Boss Selection, for men only, is the ninth.)
But product, product, product leads Claus-Dietrich Lahrs’ mantra for success at Boss. “At the end of the day, it all boils down to product. A very strong, convincing product which is doing a better job than our competition. That’s what our business is,” he said in an exclusive interview with WWD.
Acting on this philosophy, the past year has seen the German powerhouse brand improve and enrich its quality and fashion content, and more strongly delineate the characters of its individual brands, while simultaneously scaling back the size, complexity and even distribution of its lines.
Like many of its competitors, 2009 was a challenging year for Boss. Breaking a 10-year pattern of consistent sales gains, 2009 consolidated sales, according to preliminary figures, fell 7 percent to 1.56 billion euros, or $2.18 billion. Lahrs attributed 70 to 80 percent of the slide to “voluntary reduction of merchandise.” Net income was also down 7 percent to 104 million euros, or $145 million, while operative earnings (EBITDA) before special items slipped six percent to 270 million euros, or $376.6 million. All dollar figures are converted from the euro at average exchange.
Nonetheless, both sales and EBITDA beat the company’s own forecasts and, in Lahrs’ view, the group came through “in pretty good shape.” Analysts also continue to give Boss high marks. Final figures will be released at the annual financial press conference Monday, at which time Lahrs will also unveil the company’s strategic five-year plan.
At company headquarters here, Lahrs gave WWD a first outline of the company’s strategy through 2015. Key points, focusing on geographical split, distribution breakdown and individual brand profiles, include:
• Growing sales in the U.S. and elsewhere in Europe outside of Germany.
• Increasing the contribution of company-owned stores to reach a better balance with the company’s wholesale sales.
• Focus on a brand-by-brand strategy, adapting it as needed for each particular collection.
Geographically, Boss remains committed to growing its European home market, remaining the market leader in Germany, and further building business in France, where Boss is “probably one of the biggest foreign brands in the country,” Lahrs noted. The brand also aims at “increasing our very strong business evolution in Great Britain, which remained strong even in 2009. But the mix between Europe and the rest of the world will be rebalanced.”
Boss generates 70 percent of its sales in Europe, 20 percent in the Americas and 10 percent in Asia, but Lahrs sees the breakdown in five years adding up to 55 percent in Europe, 25 percent in the Americas and 20 percent in Asia. He expects a big piece of that Asian business to come out of China, where Boss is at the beginning stages. And he’s also very bullish about the U.S.
“The U.S. is huge for us,” he said. “In 2009 we increased business and, according to what we hear, we also gained a lot of market share, which was very reassuring. But we still have a long way to go.”
He added there’s not a lot of competition Stateside “in terms of our offering and how we are perceived regarding design, quality promise and price.” Lahrs suggested many American male consumers outside the metropolitan areas accustomed to wearing domestic tailored apparel are just discovering Boss.
“We offer European design but are still affordable, and that’s what helps us right now,” Lahrs said of the brand’s U.S. presence. And while still primarily a men’s wear proposition in the U.S., a big push is planned there for Boss Black Womenswear.
The Hugo Boss distribution network — the second pillar of the firm’s five-year plan — is also slated to change. The wholesale-retail split is 70-30, with Boss operating 365 company-owned and 1,050 franchised stores worldwide in 2009. Though wholesale partnerships will remain “tremendously important” in certain very mature markets like Germany, company-owned stores are becoming more important “where strong retailers are not as present as they are here,” Lahrs said.
China is a prime example, where Boss will open “a string of important stores” in a joint venture. But also closer to home, as in France, Boss stores already generate close to 50 percent of the group’s French sales. In the U.S., Lahrs said partnerships with leading retailers like Nordstrom, Saks Fifth Avenue and Bloomingdale’s will remain key, but he also foresees rapid growth in company-owned retail there. Now operating 40 company-owned stores in the U.S., Boss plans to open about five more a year.
“We’re also thinking about coming back to Fifth Avenue,” Lahrs divulged. New York’s newest door, in the Meatpacking District, is outperforming plan, joining stores in SoHo and Columbus Circle. “But Fifth Avenue could be interesting again if the right opportunity comes up,” he said.
In the virtual world, e-commerce is slated to contribute 5 percent of total global net sales in five years’ time. Boss now sells online in Germany, Spain, France, the U.K, Belgium and Italy, and a Boss online shop was launched in the U.S. this week, with Asia also on the online agenda.
In terms of the brand contribution to the group’s sales, Lahrs said the breakdown would remain much as it is today. Men’s wear represents 65 to 70 percent of sales, with Boss Black (including Boss Black Womenswear) generating roughly three-quarters of overall revenues. Nonetheless, he said inside the brands (Black, Orange, Green and Hugo), “we intend to make sure that new categories like women’s, shoes and accessories have a greater importance. And Boss Orange will gain a stronger presence within the brand mix.”
When it comes to the brands themselves, the third and perhaps most pivotal point in Boss’ five-year plan — the work to improve quality and strengthen the individual identity of each of the collections — already began for fall. “At the end of the day, if our collections are great the business is great,” Lahrs said. “We want to make sure each collection is different, so that there is no competition within the house, but also to be able to better compete outside.”
This not only takes time, but also dedicated talent, he pointed out. Therefore, instead of a single creative director for all of Boss Black, for example, there are now individual design teams not only for the men’s and women’s Boss Black collections, but also for the increasingly important Boss Black men’s sportswear range.
“In the past, our orientation was to use our brand to add to the existing offer. But that’s been replaced with a brand-by-brand philosophy under the big umbrella of Boss,” he said.
Among fall’s most significant changes: Boss Black Womenswear shifted its focus from business looks, which still remain important, to more feminine, partly casual and single pieces, plus a stepped-up eveningwear offering.
Boss Selection was given a complete revamp with more exclusive fabrics and a more sophisticated fit. The Boss Selection Tailored line (which is sold by invitation only in 18 stores worldwide) moved up yet another notch with its stitched-only tailored suits priced between 1,250 to 2,500 euros, or $1,700 to $3,400 at current exchange, depending on the fabric. Boss Black also became more refined and highly detailed. “I tell the teams that even if you take out the label, the customer has to understand it’s Boss,” Lahrs said.
In the era following the departure of its former designer Bruno Pieters, Hugo men’s is stronger than ever, according to Lahrs, and “will always be the fashion peak of the brand,” while Hugo women’s wear is admittedly in transition. Not so Boss Orange women’s wear, which he said was the biggest success of fall, and for both men and women expresses a more contemporary, clublike vibe.
Last in the equation: Boss Green, the group’s active sportswear range, which introduced a capsule women’s offering for fall and will be more formally launched for spring.
If 2009 posed challenges, Lahrs said it also helped the group establish important priorities. “We refocused on quality, and learned to say no to certain behavior, attitudes and requests,” he said, referring to wholesale accounts that either did not treat the brand well or were in financial difficulties.
Lahrs sees the first positive signs on the horizon, noting both wholesale and end consumers are much more relaxed. Especially outside of Europe, he believes “the premium and high-price sector will grow much faster than we all expect.”
And for Germany’s apparel giant, “coming back to strong growth rates by 2011 at the latest is not unrealistic,” Lahrs said.
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