Despite double-digit decreases across its balance sheet in 2020 and a business year severely impacted by the pandemic, German brand Hugo Boss said the suit is far from over.
What is needed is adaptation, spokesperson for the Hugo Boss board, Yves Müller, said during a presentation of financial results on Thursday.
The German firm saw some recovery at the end of the year in important markets like China, but this wasn’t enough to stave off a 29 percent decrease in fourth-quarter revenues to 583 million euros.
Over the course of 2020, sales fell 33 percent to 1.95 billion euros, compared to 2.88 billion euros in 2019.
Hugo Boss suffered not just from the fact that stores were locked down and offices were closed, but also that special events — for which consumers might purchase a new suit or formal outfit — were cancelled and international travel restricted.
Although the brand makes most of its revenue from its more formal line, it had been pushing toward more casualwear over the year — for example, entering into partnerships with sportswear brand Russell Athletic and sponsoring NBA basketball players.
Müller gave a further idea of where Hugo Boss was headed.
“We want Boss to be a lifestyle brand that accompanies the modern man, 24/7,” he said. “When you wake up, you go to the bathroom, you put on the Boss cologne. Then you go to work, you chill at home, or you’re invited to a dinner party. We want Boss to be there.
“We want to bring the suit business to the next level, and all of our initiatives in 2021 are aimed at this,” Müller concluded.
Right now, there are still significant differences between the company’s two brands: Boss, which is focused more on formalwear and makes up the much larger proportion of the business, and Hugo, which is the more casual line.
In the fourth quarter of 2020, Hugo sales declined 26 percent to hit 81 million euros, while Boss sales fell 30 percent to total 502 million. For the year, Hugo sales fell 28 percent while Boss sales dropped 33 percent.
Double-digit decreases dominated the fourth quarter and results were slightly worse than analysts anticipated. However, the company still planned to pay out a minimal dividend to shareholders and Müller denied the brand could become a target for takeovers.
“It has been an exceptional and challenging year,” he conceded.
Stores in the company’s all-important home market, Europe, had partially closed again in the last three months of the year, scuppering the gradual recovery seen there in the third quarter. Sales on the continent dropped 32 percent, currency neutral, over the quarter to hit 327 million euros.
In North America, sales slid 28 percent to 110 million euros in the fourth quarter.
Mainland China provided a significant bright spot, with fourth-quarter sales there climbing 24 percent. Hugo Boss plans to open another flagship store in Shanghai in the second half of this year and had already witnessed good business over the Chinese New Year in mid-February.
Unfortunately, Chinese consumers and mild recoveries in Australia and Japan were not enough to compensate for decreases in other areas of the Asia Pacific territory and the quarter ended on a 3 percent dip to 124 million euros.
For the full year, sales fell 32 percent in Europe and 45 percent in the Americas. China grew 5 percent, but Asia-Pacific overall ended the year 22 percent down.
E-commerce progressed substantially over the year. The company’s website expanded sales in 32 countries and online sales rocketed up 49 percent, currency adjusted, over the year, allowing Hugo Boss to tally up 221 million euros in online sales. This equaled 11 percent of total sales in 2020 and was the third year in a row the brand’s e-commerce had seen double-digit growth.
Hugo Boss will give a further 12 nations, including Russia and South Korea, access to its website in the first half of 2021. The plan is to raise online sales to more than 300 million euros by the close of this year and 400 million by the end of 2022, Müller said.
The brand’s EBIT came to minus 236 million euros. In 2019, it had been positive, at 344 million euros. However, the fourth quarter of 2020 did indicate some slight recovery. Although EBIT had fallen 89 percent in the fourth quarter, it was positive — sitting at 13 million euros and reflecting solid cost management.
A new chief executive officer, Daniel Grieder, formerly with Tommy Hilfiger and PVH Europe, is to start in June.
In terms of a prognosis for the coming year, Hugo Boss expects improvements in EBIT and in its financial results, with a recovery likely starting in spring. “But we can’t be any more concrete than that,” Müller explained. There was still too much uncertainty, particularly with around half of Hugo Boss’ retail spaces still closed in Europe during the first quarter.
But, he continued, “we are sure we will recover.” In regions where infections were under control and vaccinations rollouts were faster, Hugo Boss was already seeing an upturn, he explained. That included double-digit growth in mainland China and a week-by-week recovery in U.S. stores.
Analysts from JPMorgan and Baader Bank agreed, writing that they too expected Hugo Boss to withstand the crisis and to begin to recover in the second half of the year.