BERLIN — Hugo Boss has had a tough week — reaching its height with the surprise resignation of longtime chief executive officer Claus-Dietrich Lahrs.
The Metzingen-based group said Lahrs, who has led the German megabrand for the last eight years, was leaving “upon his request as part of a mutual agreement.” His resignation is effective Monday.
Bernd Hake, who is senior vice president of Europe, Middle East, Africa and India, will be appointed as member of the managing board responsible for sales and retail, as of March 1. For the time being, Lahrs’ other responsibilities will be assumed by other members of the managing board, but the search for a new ceo is expected to start without delay.
Lahrs’ abrupt departure follows Boss’ profit warning for 2016 on Tuesday, in which it cited weak market conditions in China and the U.S. The group abandoned its adjusted operating margin of 25 percent and said it now expects a low double-digit decline in adjusted operating profit — EBITDA before special items — in 2016.
This comes on the heels of lowered sales and earnings guidance for 2015 revealed in October. Both announcements seriously pressured Boss shares, which year to date have lost over a third of their value. The shares closed up Thursday by 0.8 percent to The share is currently trading at 51.68 euros, or $56.85 at current exchange.
Lahrs joined Boss in August 2008, coming from Christian Dior Couture where he was managing director. During his tenure at the Germany company, he was instrumental in significantly expanding the brand’s international activities and overseeing the shift from a wholesale to own-retail powered business model.
Indeed, the number of directly operated stores surged from 330 in 2008 to more than 1,100 in 2015, with directly operated stores generating 57 percent of group sales in 2014 versus 16 percent in 2008. All 2015 figures and breakdowns will be released on March 10 at the Hugo Boss annual financial press conference.
Group sales almost doubled under Lahr’s eight-year stewardship, growing from 1.17 billion euros, or $1.72 billion, in 2008, to 2.81 billion euros, or $3.12 billion, in 2015, according to preliminary figures. Dollar figures are converted at an average exchange rate for the period to which they refer.
After several unsuccessful starts and stops, women’s wear also finally came into its own under Lahrs’ leadership and the appointment of Jason Wu as artistic director of the women’s core Boss brand in 2013. The women’s business continued to generate double-digit gains in 2015, ahead of the brand average, and Boss was forecasting women’s would contribute 20 percent of group sales by 2020.
The announcement of Lahrs’ departure took many off guard. “It may be understandable but I was indeed surprised,” commented Mark Josefson, an Equinet analyst, who noted Tuesday’s dramatic profit warning had nonetheless made him somewhat immune to unexpected Boss announcements.
“The company is having a bit of a credibility problem with the steady edging back of goals and so until 1 p.m. today, I had hoped that [the financial press conference on] March 10 would bring some clarity in terms of [the group’s] growth prospects.”
Josefson said Lahrs had a good track record, especially for the three to four years prior to the first signs of a sales slowdown in 2014 due to challenging market conditions. Lahrs was particularly keen on growing the group’s business in China, and, as Josefson pointed out, Boss bought its Chinese distributor Rainbow to better control business there the year Lahrs came on board.
“It was the correct decision, but running your own stores has higher costs, and he got tripped up with falling footfall in stores in China. When sales are down, you get hammered on margins, but for the larger part, it was the right strategy,” he stated. Remaining an issue is the brand’s positioning in China, with Boss saying Tuesday that it would cut prices there to be more in line with competing European and American brands.
The second big issue facing Boss, Josefson continued, is brand management in the U.S. Indeed, the company said it would be limiting distribution of the core Boss brand at wholesale in reaction to the highly promotional market environment in America. In Europe, Josefson pointed out, “Boss dictates price points and promotional activity by effectively controlling distribution of black label. They pushed this through a couple of years ago, and today Europe is the best-performing part of the market. But it takes time.”
The third strategic component that could affect the brand ‘s profit outlook is continued investments in stores, marketing and information technology. “This was a company that didn’t get too strangled by quarterly numbers and did invest, which was right for the long term. But if you go through a period of sales that are more modest than expected, it can hurt. This was a devil of a period for him,” the analyst said of the departing ceo.