BERLIN — During a 90-minute presentation about Hugo Boss’ new direction, there was little talk of the company’s modest forecast for the rest of the year. All the focus was on the future.
In the second quarter of this year, Hugo Boss returned to growth but numbers remained shy of pre-pandemic sales levels. Revenues rose 133 percent to 629 million euros in the three-month period. However, that figure was still below second-quarter sales of 675 million euros in 2019, the last “normal” business year before the COVID-19 pandemic hit.
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In the first half, the marquee German brand was able to rack up revenues of 1.12 billion euros, an improvement of 39 percent on the numbers from pandemic year 2020. In the first six months of 2019, the company had 1.34 billion euros in sales.
In a statement accompanying the results, the company’s new chief executive officer Daniel Grieder trumpeted Hugo Boss’ “great potential,” saying that “we are well prepared to further drive our business recovery also in the second half of the year.”
“We are seeing sequential improvement, which makes us very confident we’re heading the right way,” Boss’ head of finance Yves Müller said.
More of the same sentiment followed during a presentation of Grieder’s five-year strategy. Dubbed “Claim 5,” the five-pillar strategy was about claiming Boss’ position as “the leading premium tech-driven fashion platform,” said the new CEO, who started officially in June.
The company’s ambition is to double sales to at least 4 billion euros by 2025. About half of that would be brought in by the more formal Boss line. The more casual Hugo line would add a prospective 500 million euros, women’s wear should total around 400 million euros and then accessories and licensing would make up the rest of the wished-for turnover.
Major changes at the company appear mostly to involve a new marketing strategy and a bigger emphasis on digital-driven sales and production, as well as improved use of consumer data.
The marketing budget will increase from 6 percent of group net sales in 2019 to 8 percent by 2025 and the company plans to invest 100 million euros in additional marketing and 500 million euros into updating stores over the next five years. “The investment is front-loaded,” Müller conceded, adding that more than three-quarters of Boss stores would be updated within the next three years.
Grieder unveiled a new logo for both the more formal Boss line and the more casual Hugo line. This is the first time the logo has changed in about 50 years, he noted. “We don’t want to change the brand completely,” he said, praising Hugo Boss’ positive existing business and branding. “But we do want to make it younger and more relevant.”
The new, more streamlined logos are already sewn into next season’s clothing, but won’t go public properly until December.
Two distinct, accompanying campaigns are to use the Hugo Boss name more playfully, encouraging consumers to “live like a Boss” or “dream like a Boss,” and riffing on phrases like “Hugo hard or go home,” “Hugo for glory” and “How do Hugo?”
The company is also bringing back the color-coded lines that former boss, Mark Langer, had done away with because he felt they were too confusing. In the future, Boss Camel will stand for made-to-measure exclusivity and Made in Germany garments, Boss Orange for casual clothing, Boss Green for athleisure gear and Boss Black for business and smart casual looks.
Far from being confusing, the colors give more options, Grieder insisted. For example, there was an opportunity to establish different points of sale in department stores by putting Boss Green in the sportswear section while Boss Black lived in the premium men’s wear aisles.
The company is also planning to establish two digital campuses, one in Metzingen that will be consumer-facing and another in Porto, Portugal, where staff are to take on data analysis and technical details.
The Hugo Boss executives are kicking off a 14-day investors’ tour and their enthusiasm about the required level of investment did not seem tempered by the fact that the brand is still fighting its way back to pre-pandemic sales levels.
Hugo Boss grew in all of its territories compared to 2020, when retailers’ doors were closed across Europe, North America and Asia on a rolling basis, as infections ebbed and surged. The company said only 20 percent of its retail stores were closed at any one time between April and June of this year.
Over the first half of the year, Hugo Boss added 21 new freestanding stores to its network, including its first flagship in Tokyo’s Ginza shopping district, but closed 18 others. As part of the new digital strategy, Boss plans to meld the online experience more with brick-and-mortar stores, Grieder explained.
In the brand’s all-important home market of Europe, sales dipped 4 percent to 385 million euros in the second quarter. While business remained static in France and Germany, sales in the U.K. grew 7 percent on a two-year stack basis, the company said. This was partially because of the fact that U.K. stores came out of lockdown earlier than those elsewhere in Germany, Müller pointed out.
In the Asia Pacific region, sales were driven by mainland China, an area the company has been targeting for several seasons now. Although the region overall ended with a 3 percent decrease in sales when compared to pre-pandemic levels over two years, business in China grew 33 percent compared to 2019 levels. Hugo Boss had sales of 104 million euros in total in the Asia Pacific region.
In the Americas, sales surged 416 percent in the quarter to 123 million euros. Despite the huge change from last year, the numbers didn’t compare as well to 2019, when the company had revenues of 139 million euros in that market. This meant a decrease of 5 percent for sales in the Americas on a two-year basis.
As office employees worked from home and large events were canceled, it was logical that the pandemic would have a detrimental impact on Boss’ core business of formalwear and suiting.
Over the year, the company pivoted to more casual iterations and this was reflected in a rise in sales of the less formal Hugo line, even compared to 2019. Hugo sales over the quarter totaled 87 million euros.
Although the company said that its more formal line, Boss, did benefit from “pent-up demand for occasionwear and businesswear” in the second quarter, sales for that line did not return to pre-pandemic levels. These totaled 541 million euros in the second quarter this year, compared to 587 million euros in 2019.
Earnings before interest and taxes bounced back from 2020’s lows. Last year, Hugo Boss’ EBIT in the second quarter was 250 million euros in the red. This year EBIT stood at 42 million euros. In the second quarter of 2019, EBIT stood at 76 million euros.
Hugo Boss made modest forecasts for the rest of the year, predicting the brand would end the year with sales up between 30 and 35 percent compared to 2020 and EBIT somewhere between 125 million and 175 million euros. But even if this is achieved, the German brand would still end this year with sales totals and an EBIT far lower than in 2019.