Hugo Boss Credits New Strategy for 2021 Comeback
BERLIN — Presenting its financial results for 2021, Hugo Boss said its transformation is now well underway and that it was already reaping the benefits of its new strategy.
“Every part of the business is growing and the branding refresh is also driving our momentum,” chief executive officer Daniel Grieder enthused during an online press conference. “Maybe we were a few years behind, but now we are back and we have a clear vision as to where we are going to.”
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Over the course of 2021, Hugo Boss almost managed to return to pre-pandemic levels of growth, registering a 43 percent increase in revenues to 2.78 billion euros. In 2019, the last “normal” year before the COVID-19 pandemic began, Hugo Boss saw sales revenues of 2.88 billion euros.
The company had readjusted guidance upward in the third quarter. The fourth quarter confirmed this prognosis, with sales gaining 51 percent, currency adjusted, to bring in another 905 million euros for Hugo Boss by the end of the year.
The brand has revamped its image over the past six months, extended its digital reach, created new logos and sales strategies and enlisted a wide array of influencers and celebrities. It is also putting more focus on casual looks and what Grieder, who took up the job in the middle of 2021, calls “dress-thletic” products.
Grieder noted order books for this coming winter’s collection were up by 40 percent already, compared to pre-pandemic levels.
Known for formal menswear, Hugo Boss was badly impacted by the health crisis in 2020 and 2021, which scuttled events and ushered in home working. But consumer sentiment picked up again noticeably from the second quarter of 2021 onward, as the pandemic subsided and lockdowns eased.
In Europe, the fourth-quarter sales increased 64 percent, currency adjusted, to hit 546 million, while in the Americas, they rose 71 percent to 197 million euros.
“The business there [in the U.S.] is on fire,” Grieder enthused. Hugo Boss executives have previously credited collaboration with Russell Athletic for a turnaround and a higher profile in North America.
The brand had adapted its offerings for that market, adding more casualwear and more clearly delineated formal looks from casual at retail, Grieder explained. Rather than putting all Hugo Boss products into one area in a department store, Hugo Boss was now available in different departments, spread throughout sports, casual and formalwear areas.
In Asia Pacific, sales in the fourth quarter rose 9 percent to 141 million euros.
Hugo Boss executives also denied experiencing any major fallout from Chinese consumers boycotting Western-made goods in 2021. This was despite the fact Boss had stopped using Xinjiang cotton, which activists say is produced using forced labor.
In mainland China, the company saw growth of 18 percent over 2021 and exceeded 2019 pre-pandemic sales by 24 percent, according to Hugo Boss’ chief financial officer Yves Müller. Hugo Boss has a new Chinese management team in place since September and plans to enlist more brand ambassadors and influencers there. The biggest problem for Hugo Boss in China had been pandemic-related lockdowns, Müller insisted.
The company also said it also managed to avoid many of the pandemic-related sourcing and logistics problems many competitors in the apparel industry had complained about over the past two years. While rising freight costs could become a problem, availability was not, Müller said. Around half of Hugo Boss’ production is in Europe as well as in “near-shoring” countries like Turkey. “This gives us a competitive advantage,” he argued.
Throughout the year, casual clothing from the German company’s two main lines, Hugo and Boss, had done better than formal offerings, executives said.
Hugo, which tends to be more casual, began to see better sales from the second quarter onwards and grew 45 percent over 2021 to bring in 413 million euros.
Boss didn’t return to growth until the end of 2021 when more formal events, like weddings and events, began to be scheduled again. Boss grew 42 percent to bring in 2.18 billion euros although sales were still down 2 percent on 2019 results.
Hugo, meanwhile, had nipped past 2019 levels and seen a 6 percent increase on sales from before the pandemic.
But, as Grieder explained, “We don’t believe that the suit business is over. People are still buying occasion wear for events like weddings.” And formalwear still makes up around a quarter of Hugo Boss’ business, he said.
However, the company does see an opportunity in more casual styles.
“We see a trend for more performance [formal] clothing,” he explained calling the emerging category “dress-thletic.”
“This suit I have on, it is completely comfortable. It is completely flexible and it’s water-resistant and you can run or bike in this suit,” he contended. “For me that’s the future of formalwear.”
The company’s operating profit, or EBIT, also increased. It stood at 228 million euros in 2021 versus 236 million euros in the red in 2020. Executives said the company was spending about a third more each on marketing and digital development, along with other expenses.
Hugo Boss said it expected the positive trend to continue in 2022.
The brand predicts sales growth of between 10 and 15 percent in 2022 between 3.1 billion and 3.2 billion euros. Hugo Boss has a stated goal of reaching 4 billion euros in sales by 2025.
Market analysts from the likes of Citigroup, the Royal Bank of Canada and Baader Bank, praised Hugo Boss’ recovery, but suggested that the guidance for this coming year was a little conservative.
The company had yet to calculate in the impact of the war in Europe. Hugo Boss halted operations in Russia this week, closing 28 points of sale, but is still paying around 200 staff. Demand was steady before the closure, the company said.
Sourcing undertaken in Ukraine, which makes up less than 1 percent of Hugo Boss’ production, was being diverted elsewhere. Hugo Boss noted that business in both nations accounted for about 3 percent of total sales in 2021.
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