BERLIN — With a stronger focus on personalization and speed, Hugo Boss is aiming to increase sales and improve its operating margins over the next four years.
The Metzingen-based group presented its 2022 strategic business plan on Thursday at an investor day in London. Boss said it intends to increase currency-adjusted sales by an average of between 5 percent and 7 percent per year over the next four years, and grow its operating margin to 15 percent, a gain of almost 3 percentage points over the expected earnings before interest and taxes margin for fiscal 2018.
“We want to grow faster than the market, and expect our operating profit to develop significantly better than our sales,” commented chief executive officer Mark Langer.
The gains are to be driven by growth in the group’s online business, which is expected to quadruple to about 400 million euros by 2022; improved retail sales productivity, which is forecast to grow by an average of 4 percent annually; taking advantage of further growth potential in Asia, with China playing the key role and overall sales in the region expected to increase from its current 15 percent to a 20 percent share of group sales in 2022.
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And lastly, above-average growth of the group’s contemporary brand Hugo, which involves exploiting its potential in the casualwear segment as well as opening additional Hugo stores with a unique store concept, and increased social media activity.
To improve the group’s gross profit margin, Boss will be placing particular emphasis on further increasing the sales share from the group’s own retail business, reducing the complexity of the Boss and Hugo collections, improving markdown management and decreasing the sales share of the outlet business. A group-wide efficiency program aims to more efficiently use operational expenses, and optimize the organizational structure.
The Boss 2022 strategic business plan is built on two strategic pillars: personalization and speed. Boss said it will substantially expand its personalized offerings, making use of a more individualized customer approach, a personalized product, and a unique shopping experience.
In terms of speed, the group aims to make its business processes more agile, leveraged by the group’s existing expertise in product design and development, modern logistics and IT infrastructure and the use of digital showrooms.
Boss has already shortened time to market, Langer pointed out in a press conference call Thursday morning, through the digital development, for example, of the Hugo collection. He said the time from conception to getting the product in store has been cut by about half. The use of data analytics has also made it possible to heighten the timeliness and relevance of the product offering, he noted.
Hugo Boss confirmed its previous target range for future dividend payments. The group said in light of its “very healthy financial situation and expected strong cash flows,” which are expected to reach between 250 million and 350 million euros per year until 2022, Boss intends to continue to distribute 60 percent to 80 percent of net income to its shareholders.
Langer said the plan presented on Thursday is not a completely new development, but rather a follow-up to the group’s strategic realignment two years ago. Now fully implemented, that realignment involved a two-brand-only focus on the Boss and Hugo labels, heightened product quality, global price harmonization and faster digitalization of the company.
These steps have born fruit, Langer said, adding he expects the 2022 strategy to similarly benefit the profitable growth of Hugo Boss.