The brand is targeting younger customers and more casual wear.
Stuttgart The Hugo Boss fashion group does not fear any major adverse effects from the insolvency of Peek & Cloppenburg’s German business. “We are confident that the customer will optimize himself again under the protective shield procedure,” said CEO Daniel Grieder. P&C is one of the largest Boss customers worldwide. However, according to the company, the share of sales is well below one percent.
In the past, P&C has always positioned Hugo Boss strongly, achieved high sales and always paid on time, said Grieder. There are no signals that P&C will no longer order. You have a good relationship and support each other in such situations, emphasized the boss.
The withdrawal from the Russian business also seems manageable for the fashion group. The fashion group emphasizes that the share of sales was recently less than three percent.
And while other luxury manufacturers had to accept a slump in sales due to corona-related closures in China, Boss left this crisis comparatively cold. Boss generates just ten percent of its sales there – significantly less than many of its competitors. Grieder predicts that business in China should grow again in the current financial year.
After the record year of 2022, the boss sees his brand continuing to grow despite the difficult economic times. “In 2023 we will build on our regained brand strength and work consistently to further drive sales and earnings growth,” said Grieder on Thursday.
However, he remained cautious with his forecast: “We cannot ignore the volatility caused by inflation, economic and geopolitical risks,” said Grieder, who had managed the business of competitor Tommy Hilfiger for many years before moving to Boss. For 2023, he expects sales growth “by a mid-single-digit percentage”. The fashion group would thus remain below the four billion euro mark in sales this year.
The operating result (EBIT) will increase by five to twelve percent to an amount between 350 and 375 million euros. This would mean that the Metzingen-based company would grow much more slowly than in previous years.
Boss stock loses significantly
The cautious outlook was not well received on the stock exchange: Hugo Boss shares lost more than three percent to less than 63 euros. However, the paper had reached a three-year high at the beginning of the week.
With its strategy and the new collections, Grieder wants to reach significantly younger customers. To do this, he relies on smaller, focused ranges and follows the trend towards more casual clothing. He increased the marketing budget by more than 40 percent to 288 million euros – almost eight percent of sales. His goal is also to further expand the wholesale business.
Even the CEO now prefers to wear a hoodie than a jacket.
(Photo: Hugo Boss AG)
So far, the strategy has worked: in 2022, Boss had achieved record sales with its fashion despite inflation and fears of recession. Revenues increased by 27 percent to 3.7 billion euros and EBIT by 47 percent to 335 million. The bottom line is that the consolidated result increased by 54 percent to 222 million euros. The gross margin, which is important for the industry, reached the announced 61.8 percent. Management cited the fact that more goods were being sold at full price as the reason.
The shareholders are to participate in the profit growth with a dividend increased by 30 cents to EUR 1.00 per share.
Similar to the French luxury goods groups Hermes and LVMH or the Spanish Zara parent company Inditex, which is active in the lower price segment, Boss has not felt any reluctance to buy so far.
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