Frankfurt - Hugo Boss announced plans to eliminate two brands and slow down expansion of its store network as Chief Executive Officer Mark Langer resets the ailing German fashion house’s strategy six months into the job.
The company will only produce clothes under the Hugo and Boss brands, narrowing its focus to casualwear and business clothes, the Metzingen-based suitmaker said in a statement on Wednesday. Hugo Boss said 2017 will be a transition year and it expects a return to growth in 2018, and the company repeated a forecast for cost savings of 65 million euros ($61 million) this year. The stock fell as much as 4.6 percent in early Frankfurt trading.
The statement was “a bit light on numbers in terms of potential cost savings,” wrote John Guy, an analyst at MainFirst Bank. He said analysts may cut their 2017 earnings forecasts.
Langer needs to jumpstart Hugo Boss, which ousted its longtime CEO in May and whose shares have lost almost a third of their value in the past year. He’s taken a strategy akin to Burberry and Marks & Spencer, which have been weeding out smaller brands amid weak consumption in Europe. Langer has signalled Hugo Boss will turn away from the luxury market in favour of making more affordable clothing.
The Boss Orange and Boss Green brands will be folded into the Boss brand, the company said. Hugo’s entry-level prices will be about 30 percent lower than Boss clothing. Hugo Boss will expand its online business, the company also said.
Womenswear will become a lower priority. Boss won’t show a new womenswear line at fashion shows in New York next year, a break with an emphasis on that segment by Langer’s predecessor, Claus-Dietrich Lahrs, now head of the Bottega Veneta luxury brand.
Boss is also upping the assortment of casual clothes and shoes in its stores, getting in line with a trend that’s seen men and women pair sneakers and other dress-down essentials with more polished outfits.
The clothing maker reiterated its full-year forecasts. The company said August 5 that it expects operating profit will decline by 17 percent to 23 percent and currency-adjusted sales will fall as much as 3 percent.
BLOOMBERG