By Martino Carrera
with contributions from Cathrin Schaer
 on February 13, 2020
Models wear Hugo Boss in Milan.

MILAN — Hugo Boss is feeling the pressure of an activist investor.

London-based Bluebell Capital Partners, which took a minority, undisclosed stake in the German marquee apparel company last December, addressed the board and the company’s president Michel Perraudin with a letter urging an overhaul of the firm’s strategy refocusing on fundamentals such as products, flagships and communication.

Speaking with WWD on Thursday, Francesco Trapani, the former Bulgari and LVMH Moët Hennessy Louis Vuitton executive and chairman of Bluebell Capital Partners, said Hugo Boss’ structure “is big and articulated and the company generates strong profits but its performance in the past three to four years has been unsatisfying when compared to other similar businesses.”

The entrepreneur offered other investors share the same sentiment although he declined to provide specific names.

Headquartered in Metzingen, Germany, Hugo Boss is listed on Frankfurt’s Stock Exchange. The company’s 88 percent of shares are on the free float, while other main shareholders include PFC Srl and Zignago Holding SpA, both controlled by the Marzotto family, which together retain a 10 percent stake in the firm.

Contacted by WWD, a Hugo Boss spokesperson said the company “maintains an open dialogue with all shareholders that are interested in the company and looks forward to continuing to discuss its strategy aimed at creating long-term shareholder value. As a general policy, we do not comment on any investor interactions.”

After praising the company for having “a strong brand and an articulated distribution structure with directly operated stores, a strong wholesale network and franchises,” Trapani underscored that “most recently the management focused on the quantitative aspects, including cost-cutting and stock rotation ratio, which are all important sides [of the business], but these companies succeed if they are able to engage customers via products, communication and stores. We believe the company should focus on them to widen its breadth, which got somehow lost.”

The executive insisted a key pillar to the strategy encompasses increasing the firm’s like-for like sales. “They need to try to increase the existing stores’ turnover while at the same time reducing the wholesale network, [a strategy] they already started to implement but that should be carried out more firmly with the goal to protect the directly operated shops,” Trapani contended.

He also sees potential in opening additional units, eyeing the Asian market “not necessarily in this moment but after the [coronavirus] crisis there is resolved.”

According to preliminary 2019 figures, Hugo Boss posted revenues of 2.88 billion euros, up 3 percent at current exchange rate or 2 percent at constant exchange rate. Earnings before interests and taxes decreased 4 percent to 333 million euros. Final results will be released on March 5.

“Beyond the business plan they presented in 2018, financials have not been satisfying, there’s too little growth,” said Trapani, noting that turning a plan into concrete and successful actions can at times be compelling.

In particular, Hugo Boss’ chief executive officer Mark Langer said in 2018 the company would focus on personalization and speed, aiming to increase sales and improve its operating margins over a four-year period. “We want to grow faster than the market, and expect our operating profit to develop significantly better than our sales,” he commented at the time.

Milan-based market sources believe the activist fund would be pleased with a change of management at the German apparel giant with key hires coming from the marketing and communication fields. One source in particular contended Bluebell Capital Partners has been in informal talks with potential candidates to be submitted to the board.

Talking about Hugo Boss’ financial position, Trapani offered that a buyback strategy of part of its floating shares would also be desirable.

Italian daily Corriere della Sera first reported of the letter sent to Hugo Boss’ president, which came after the apparel company released preliminary 2019 figures last month.

Established at the end of 2019, Bluebell Capital Partners is spearheaded by Trapani along with former investment bankers Giuseppe Bivona and Marco Taricco. The fund describes itself as a long-term investor focused on European public equities.

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