BERLIN — In an unexpected move, Hugo Boss AG and its long-standing chief executive, Bruno Sälzer, are parting ways.
This story first appeared in the February 15, 2008 issue of WWD. Subscribe Today.
According to a statement Thursday, Sälzer is leaving his post at the end of this month due to “different views on the further business policy of the company.”
Boss spokesman Philipp Wolff emphasized that Sälzer’s departure did not indicate a strategy change for the successful German fashion house. However, he declined to comment further, and Sälzer was unavailable for comment.
Sälzer has held Hugo Boss’ top position since 2002. During his tenure, he successfully turned the brand’s women’s wear business around, significantly grew the Boss accessories business and further strengthened the brand’s company-owned retail business. His contract, which was extended in 2006, was due to expire in 2012. A successor has not been named, and until one is found, Sälzer’s duties will be assumed by other members of the board of management, the company said.
The strong-willed Sälzer was reportedly at odds with Boss’ new owner, the private equity firm Permira, over its demands for higher dividends and a larger debt burden.
Permira gained control of the German fashion house last year after acquiring its parent company, the Valentino Fashion Group. In an interview last summer in the leading German news weekly Der Spiegel, Sälzer suggested Permira didn’t quite understand the fashion business and stressed the importance of company strategy remaining in the hands of the Boss board. Last fall, five Permira executives joined the 12-member Boss board.
Another possible source of contention, according to one analyst, was the notion circulated last year that it might make sense to bring together the management of Valentino and Boss. Sälzer had generally been left alone to run Boss under VFG’s previous ownership and he firmly resisted any idea of reporting to the new management team at VFG. In Sälzer’s view, his primary focus was on managing the company for the benefit of its remaining outside shareholders, who own a minority of the firm, sources said.
Preliminary figures for 2007 released last week show Hugo Boss AG in good health. It exceeded both its sales and earnings goals, with net profits up 20 percent and currency-adjusted sales growing 12 percent to 1.63 billion euros, or $2.23 billion. All dollar figures were converted from the euro at an average annual exchange rate.
“Yes, the company is in good shape in terms of its balance sheet and rates of growth. But the margins are below those of the late Nineties when they reached 18 percent,” an analyst commented.
“There are good reasons why margins are depressed,” he continued. The diversification into women’s wear, the rollout of directly owned stores and the expansion of accessories “all make sense in the long term, but depress margins in the short term. The 13 percent margin achieved in 2007 is good compared with retailers, but compared to other brands, it’s still a few points shy.”