Since becoming CEO of Hugo Boss in 2016, Mark Langer has been reconfiguring the brand for the future.
Mark Langer has seen a lot of change in the 15 years he has worked at German brand Hugo Boss. And after being promoted to the top job of CEO in 2016, he has continued to drive that pace of change.
Just six months into his CEO role, Langer – “Mr Langer” to his colleagues – announced a bold turnaround plan intended to steer Hugo Boss back to growth following a series of profit warnings in the run-up to his appointment.
Since taking charge, he has axed several Hugo Boss sub-brands and consolidated its offer. It now has just two brands – Boss and Hugo – and while womenswear makes up 11% of the business, Langer has shifted its focus back to premium menswear.
Langer’s changes were given the seal of approval by the Hugo Boss supervisory board in March, when they extended his contract for another three years. However, there is still work to be done.
In the third quarter of 2018, sales edged up 1% to €710m (£629m), as the hot summer and late autumn put a strain on the business. Although retail sales increased by 3% on a like-for-like and currency-adjusted basis, and online sales grew 38%, gross profit margin declined by 240 basis points. EBITDA before special items fell 12% year on year to €126m (£112m). Despite this, the business confirms its full-year sales and earnings guidance, and predicts an increase in group sales in the low-to-mid-single digit percentage range.
Risks are rewarded in our industry, as are challenges to the status quo
Last month, Langer revealed an ambitious new three-year strategy – dubbed “2022” – which aims to quadruple digital sales, further expand the repositioned Hugo brand, speed up the business’s lead times, improve personalisation, and capitalise on opportunities in Asia.
He is confident the changes will help put Hugo Boss back on the path to sustainable profit growth: “Risks are rewarded in our industry, as are challenges to the status quo. This is one part of my role that I particularly enjoy,” he says in a calm, measured tone.
“Their plan makes sense,” says Luca Solca, luxury goods analyst at investment company Exane BNP Paribas. “Consolidating brands creates a clearer brand message, and lowers the [promotional and distribution] burden of supporting those brands.”
The turnaround of such an established business will take time. Since its launch in 1924 in Metzingen, Germany, by the eponymous designer, Hugo Boss has grown into a behemoth, synonymous around the world with suiting and smart casualwear. It has 439 own stores and 7,800 points of sale, and almost 14,000 employees.
But it is a challenge Langer is ready for, even though he never intended to work in fashion. Born in the southern German town of Pforzheim, just 40 miles from Hugo Boss’s headquarters in Metzingen, Langer went on to gain a master’s degree in business administration and mechanical engineering from the Technical University of Munich, graduating in 1995.
His first job was as an associate at management consulting firm McKinsey & Company in Munich in 1995. A stint as financial analysis manager at consumer goods corporation Procter & Gamble followed in 1997, before he returned to McKinsey as senior associate and project leader two years later. He moved to Hugo Boss in 2003, first as director of finance and accounting, then as senior vice-president of global replenishment, before becoming CFO in 2010.
The first step that we made clear to our design teams was that there’s one Boss customer
“[Working at Hugo Boss] was a dream combination – using the analytical part of me combined with something that I love as an industry: branded goods,” he says. Becoming CEO six years later was a “once in a lifetime opportunity”.
Langer replaced Claus-Dietrich Lahrs, who stepped down in 2016 following a series of disappointing results. Lahrs had been trying, unsuccessfully, to push Hugo Boss up into the luxury market, while hoping to energise the womenswear side of the business via blockbuster fashion week shows and the high-profile hire of Taiwan-born, New York-based fashion designer Jason Wu as creative director in 2013. Wu left the business in February 2018.
By 2016, the Hugo Boss offer had become confusing and complex, and there was little differentiation between its handful of sub-brands. It issued a profit warning in February that year. Langer’s first big change was his punchy “two-brand strategy”, consolidating the Hugo Boss offer in a way that chimed with similar strategies at Burberry, Armani and Ralph Lauren. He dropped the casual Boss Orange and athleisure-focused Boss Green brands and incorporated elements of both into the Boss Black brand, which has been simply called Boss since spring 18.
The Hugo Boss UK website currently shows Boss retail prices range from £11 for a pair of socks to £1,800 for a leather jacket in nappa lambskin with shearling. Suiting ranges from £400 to £600.
“It was a tough call for us,” admits Langer. “For Boss, the first step that we made clear to our design teams was that it’s not a different customer. There’s one Boss customer.”
He says the changes have had an immediate positive impact on the Boss brand, creating consistency and cohesion.
However, he admits it was a “difficult journey to convince our wholesale partners”: “Some had Boss Orange corners and Boss Green corners and Boss Black corners [in their stores]. We said, ‘No, it’s going to be one brand. You can have one corner selling more casual parts, one selling more formal parts, but it’s not different branding and not a different brand message any more’.”
More denim and jersey products bring casual elements to Boss, while suiting – the brand’s signature – has also evolved. Great fits, top-end fabrics and competitive prices remain, but innovations, such as stretch fabric tailoring, keep it moving forward.
“Our customers respond well to the brand’s renowned sharp cuts and signature tailoring, alongside its refined casual options,” says Fiona Firth, buying director at online menswear retailer Mr Porter, which has stocked Boss since 2015. “Unsurprisingly, suiting, outerwear and tuxedos are the bestselling styles, as our customers appreciate the premium fabrics and assured sophistication that comes from owning a Hugo Boss suit.”
Hugo is a contemporary brand. It’s addressing a different customer and a different market.
Hugo has also undergone a reinvention and been repositioned with a more youthful, fashion-led direction. It is smartly tapping into fashion’s current youth-driven craze for streetwear-inflected athleisure mixed with elements of tailoring, often heavily logoed. Some items come with the Hugo logo spelled in reverse, intended to show up correctly when reflected and photographed in a mirror selfie – perfect for the social-media-driven generation. Anwar Hadid, the 19-year-old younger brother of superstar models-come-influencers Gigi and Bella, features in its advertising campaigns.
Hugo is now treated as a separate brand from Boss, rather than its diffusion line, and it is pitched at what Langer calls “one price point below the starting price point of Boss”. Retail prices are 25%-30% lower than those of Boss.
“Hugo is a contemporary brand,” he explains. “It’s addressing a different customer and a different market. It’s a younger and more fashion-forward customer that we’re targeting. [Boss and Hugo are] not competing for the same basket now, though [they] are still relatives – ultimately it says Hugo Boss on both of them.”
Steve Cochrane, owner of multichannel independent retailer Psyche, winner of Menswear Independent of the Year at the Drapers Independents Awards 2018, has stocked Hugo Boss for 32 of the 36 years he has been in business.
“Before, you couldn’t tell the difference between the sub-brands – there wasn’t enough identity between them,” he tells Drapers. “But Hugo Boss has worked hard, and the points of difference are powerful now. There’s much less overlap, which is definitely a good thing.”
He adds: “We’ve shown growth every single season with Hugo Boss. That’s a powerful statement in more than 30 years.”
Langer has thrown weight behind the Hugo brand, and opened dedicated stores with a bold new concept. The company is planning to have 10 Hugo stores globally by the end of 2018. A store in Birmingham’s Bullring opened in November, joining stores in Westfield London in White City, which opened in August, Paris’s Le Marais (opened in July) and Amsterdam (in June).
Early signs are promising, says Langer, and the new Hugo concept is “resonating extremely strongly”. In fact, his new strategy has Hugo at its core. Boss currently accounts for 85% of the business, compared with 15% for Hugo. However, although Langer declines to reveal precise predictions, he says he expects “above-average growth” and “significant sales increases” in the latter.
“Hugo operates in a segment that is growing more strongly than the more classic segment where Boss is competing,” he explains.
As well as focusing on growing Hugo, the new strategy will look at opportunities in Asia: the business’s fastest-growing market over the last two years.
“In relation to some [other brands], like Armani and Zegna, which have a much bigger footprint in China than we have, it’s an unpenetrated market for us. But with the momentum we have right now, Asia-Pacific in total, driven by China, will account for 20% of our business by 2022,” says Langer.
Speed and personalisation are also key drivers for the business and it is turning its attention to new, digitally developed products. The plan is to develop more and more products without the need for sampling, in order to react more quickly to trends.
Hugo Boss is currently selling its fourth digitally designed range, and it has cut lead times from six months to eight weeks.
Also key to Langer’s new three-year plan is digital growth. Online sales currently account for 4% of the total, and Langer aims to quadruple this to €400m (£356m) by 2022.
As well as “maintaining the strong momentum” of hugoboss.com, which is “enjoying around a 40% growth rate”, Langer intends to enter new markets. The brand has 11 local websites, including in the UK, France and Germany, and is considering Canada, Russia and Scandinavia. The most important aspect of his digital strategy will be a shift to concessions on third-party websites, acknowledging that, today, online growth is coming from multi-brand platforms such as JD.com, Zalando and Asos.
Langer points to Hugo Boss’s partnership with German etailer Zalando, announced in October, as the beginning of this shift.
“We are taking over the responsibility for key tasks,” says Langer. “It’s our inventory pool, our merchandising decisions, our fulfilment, our images and product descriptions, which shifts the responsibility from [Zalando], our partner, who is still operating the website, but it is a digital concession operated by us.”
Of the €400m targeted digital sales, Langer says half will come from digital concessions: “We believe that’s the single biggest growth opportunity.”
This digital growth, alongside the opening of more of its own stores, will inevitably have an impact on the Hugo Boss wholesale business, which currently accounts for 34% of sales.
As a long-time stockist, Cochrane is realistic about Hugo Boss’s need to evolve “for its own well-being” but says its direct-to-consumer strategy poses a challenge.
“We have enormous respect for our wholesale partners,” says Langer. “[But] we think that the traditional bricks-and-mortar wholesale business is probably not as strong a revenue driver. Over the next few years we expect our wholesale business to be relatively stable because the underlying wholesale business will remain under pressure from moves into more digital or monobranded physical stores.”
Langer is making the difficult decisions needed to revitalise the Hugo Boss brand. While his ambitions might be bold, his intentions are clear: “We are all about building a bigger, more profitable business. You need to stay true to your core, but never stand still.”