German luxury fashion house Hugo Boss is making big changes in order to turn its books back to black by 2018.
Its key drivers include narrowing its focus to just two lines—including one at a lower price point to appeal to younger consumers—and making a big push toward digital.
Hugo Boss’s managing board set out its plan to return to profitability during an investors day in London on Wednesday. CEO Mark Langer—who was was appointed to the role in May, after formerly serving as the company’s finance chief—said that maintaining a slimmer brand portfolio, making its prices the same worldwide, and closing stores, particularly in the U.S., are all part Hugo Boss’s plan to bounce back from slipping sales in 2016. The company’s sales slipped by two percent this year, and it expects its earnings to fall an additional 17 and 23 percent this year.
Realigning the brand’s portfolio is at the top of the to-do list. Currently, Hugo Boss has four brands, but who they target and where they fit in the retail market is hard to define, according to the company’s statement. “The complexity of our brand portfolio has led to confusion among our customers,” chief brand officer Ingo Wilts said in his presentation. To fix that, the company will fold its Boss Orange and Boss Green lines into its core Boss brand.
Boss will target a higher-spending customer, with a focus on business wear and high-end casual clothing. It will compete with other luxury brands including Burberry, Prada and Armani. Hugo, on the other hand, will be aimed toward a younger consumer, and it will be priced at about 30 percent lower than the Boss line in order to compete with lower-priced luxury brands such as Rag & Bone and The Kooples. “We have placed too strong a focus on a push into luxury price points,” Langer said about the shift.
The brand will also pull back from womenswear; it will only show its men’s collection at the next New York Fashion Week. Dissolving multiple lines into a smaller number mirrors what other brands, from Marc Jacobs to Calvin Klein, have done in recent years.
In recent months, Hugo Boss has poured money into its online presence in order to get in front of younger consumers. In response to mobile sessions growing by roughly 20 percent in the past two years, it has completely revamped its website and launched a mobile app. “Social media and networks have replaced the in-store experience,” said Langer. The digital makeover reflects what other luxury brands including Coach and Burberry have done—but in the case of those two, significant investment in digital has yet to translate to sales.
And Hugo Boss hasn’t given up on brick-and-mortar experiences. It’s experimenting with UberCentral, a partnership with Uber that allows customers to be picked up and dropped to and from Hugo Boss stores.
Savvy consumers and a rising trend of shoppers seeking out the cheapest prices for products online has also forced Hugo Boss to adjust its global pricing. By 2018, the company plans to have its prices aligned across the world, which means America’s prices will remain stable, Asia’s will drop and Europe’s will rise slightly, according to the company. It’s a move a number of brands are having to come to terms with. As shoppers are increasingly comparing prices online and traveling, it has become easier for them to recognize when brands are hiking up the price in one region and not another.
Returning focus to its core customer—men—and not continuing down the path of trying to cement a high-luxury name for itself should pay off, according to Chris Paradysz, the founder and CEO of PMX Agency. “While the Hugo Boss brand has been off in luxury land and busy positioning itself as a luxury brand for women, it hasn’t been keeping up with where the demand is,” he said. Men are after more than just a traditional suit—they are wanting to incorporate more casual fabrics and pieces, like denim and footwear, into their everyday wardrobes.
Paradysz said the shift has come at a good time, and he believes the brand will bounce back because of its credibility and name. “Men are looking for more choice, and Hugo Boss brings an air of sophistication and elegance,” he said.
Photo via Hugo Boss.