Hugo Boss, the German fashion label, announced that as of March 9 it temporarily closed its 28 stores in Russia and suspended all its retail and e-commerce business activities there.
Hugo Boss joined scores of industry names, including Nike, Adidas, Hermès, Chanel, LVMH, Burberry, Ikea, Asos and Calvin Klein owner PVH, showing their displeasure with Russia over its deadly invasion of neighboring Ukraine.
Russia and Ukraine accounted for around 3 percent of Hugo Boss’s sales in 2021, although the company has no stores in Ukraine.
“We are deeply concerned by the terrible situation in Ukraine. Our deepest thoughts are with the millions of people affected by the war and suffering from the humanitarian crisis,” said Hugo Boss chief executive officer Daniel Grieder, the Swiss-German executive who joined the company in June from Tommy Hilfiger. “We will continue to monitor the situation very closely and adapt our measures and financial support accordingly.”
Hugo Boss made the announcement during the company’s annual earnings call on March 9 that revealed the German firm, which is undergoing an identity metamorphosis, had strong sales and profits for 2021 despite the Covid pandemic taking a chunk out of shopping activity earlier in the year.
In a Nutshell: With new leadership, Hugo Boss has been on a campaign to lighten up the vibe around the 45-year-old venture’s brands. The company, which made its fortune by selling sleek Wall Street-ready men’s suits, showcased its game-changing collaboration last year with Russell Athletics. A baseball-themed line of sweatshirts, sweatpants, sweaters, T-shirts, tank tops, shorts and jackets were front and center at the spring 2022 show at Milan Fashion Week. It was squarely aimed at the Gen Z customer and offered more sportswear-minded clothing with a Boss logo. Even the logo has been updated to be more sleek and less boxy.
Hugo Boss said the Russell Athletic collaboration is just the beginning of the Boss brand’s goal of strengthening its position in the casual wear segment as men’s suits become less popular. At the same time, the Hugo brand is working to become the first point of contact for young consumers. The German venture believes that by 2030, Gen Z will make up the largest consumer segment in the world.
Helping the company’s robust sales was the adoption in August of the “Claim 5” strategy. This plan aims to boost brands, make product king, lead in digital, rebalance omnichannel and organize for growth.
To be quicker to respond to consumers’ tastes, Hugo Boss wants to reduce its product lead time by about 30 percent in 2025. This will be done by improving the company’s sourcing and production processes. A prime example of this is the Boss and Hugo capsule collections, which are being developed in just a few months.
Shorter lead times were helped last year by adopting a supply-chain dashboard to improve the visibility of goods available and the merchandise flow.
Retail stores are also getting a new look. The Boss and Hugo brands developed new store concepts at the end of last year, and they will be adopted by 100 doors this year. Also, later this year Hugo Boss plans to open its first global anchor store on Oxford Street in London.
Net sales: Group sales for Hugo Boss grew 43 percent in the fiscal year ending Dec. 31, 2021, to 2.786 billion euros or $3 billion. In 2019, group sales had been 1.9 billion euros or $2 billion. Consequently, currency-adjusted sales remained only 1 percent below pre-pandemic levels of 2.88 billion euros or $3.1 billion in 2019.
The company said that the Covid pandemic affected sales at the beginning of 2021, but business accelerated rapidly from the second quarter onwards when vaccinations were more readily available. The uptick in demand was particularly acute in Europe and strong in the Americas. By the fourth quarter, Hugo Boss recorded its highest ever quarterly sales. Sales totaled 906 million euros or $989 million.
Boss menswear was still the big giant, garnering 2.2 billion euros in sales or $2.4 billion, while Hugo came in second with 400 million euros or $436 million.
Sales in the United States skyrocketed 78 percent in 2021 over the previous year and rose 4 percent over 2019. EU sales mushroomed 41 percent.
For 2022, the company is predicting sales will reach up to 3.2 billion euros or $3.5 billion.
Net earnings: A major improvement was seen in profits. In 2021, net income totaled 144 million euros or $157 million compared with a net loss of 219 million euros or $239 million in 2020.
Earnings per share in 2021 were 1.99 euros or $2.07 compared to a negative 3.18 euros or $3.47 in 2020. Dividends per share for 2021 came in at 0.70 euros or $0.76 versus 0.04 euros or $0.045 for the previous year.
CEO’s Take: “Right from its start, our growth strategy fueled brand momentum around the globe,” Grieder said. “The highly successful branding refresh and ongoing investments will further drive relevance for Boss and Hugo in the current year. We have everything it takes to reach record sales in 2022. As a team, we will take a big step closer towards our goal of becoming one of the top 100 global brands.”