HUGO BOSS has identified five levers for ensuring profitable growth. The BOSS core brand is to be enhanced by means of product, distribution and communication measures. The brand, which has its roots in menswear, will be further expanded in womenswear. The offering of omnichannel services will spur continued growth in the Group’s own retail business in both the online and offline segment. Finally, the Group is seeking a stronger regional balance and plans to generate a greater volume of sales outside its European home market. Building on the Group’s operational strengths will provide substantial support to the implementation of the various growth initiatives.
HUGO BOSS sees potential in the expansion of its luxury offering, which complements the historically strong positioning in the premium segment. In doing so, the brand demonstrates its tailoring excellence, generating a halo effect for the whole of its business. With this in mind, it is working on enhancements to its BOSS core brand, particularly in markets in which the brand has historically been perceived predominantly in a multibrand setting and via its entry-price products. Consequently, HUGO BOSS offers its customers a globally consistent brand image and a comprehensive range extending up into the high-end segment. The Group assumes that BOSS brand sales in the luxury segment will more or less double to around 20% by 2020. At the same time, BOSS is gradually withdrawing from the entry-price segment, which will in future be addressed by HUGO and BOSS Green in particular.
The enhancement of the BOSS brand is also reflected in the Group’s distribution activities. Looking forward, the core brand will be given even more space at the Group’s own stores compared with the other brand concepts. In wholesale as well, the Group is intensifying its control of the brand by requiring its partners to distribute the BOSS core brand solely in a monobrand setting, i.e. in shop-in-shops, in future.
HUGO BOSS has identified good opportunities to expand its position in the womenswear market and repeat the success it has achieved with menswear. The Group assumes that it will be able to increase the share of sales contributed by womenswear to at least 15% by 2020 (2015: 11%).
HUGO BOSS was once again successful in womenswear in 2015. This was underpinned by inspiring fashion shows and attractive product launches. The two collections presented by Jason Wu last year had an unmistakable design signature, which will continue to define BOSS womenswear in the future. The impressive fashion shows during New York Fashion Week and the resulting media response ensured a significant improvement in terms of brand awareness and perception, which was reflected in mid-single-digit sales growth in 2015.
Over the past few years, HUGO BOSS has comprehensively realigned its business model with the requirements of the Group’s own retail business. By enlarging this distribution channel, the Group is able to present and sell its brands and collections to optimum effect without relinquishing its established wholesale business. HUGO BOSS is responding to growing customer expectations of seamless cross-channel shopping and brand experiences by stepping up its omnichannel activities. In light of new openings, productivity gains and takeovers, the Group anticipates that the share of sales contributed by its own retail business will climb to at least 75% by 2020 (2015: 60%).
The Group sees good opportunities to increase its global market penetration by opening new stores and shop-in-shops. Although the rate of expansion will slow compared to earlier years, the Group will continue opening new stores in promising locations. Furthermore, it is increasingly making use of opportunities to renovate and/or expand successful stores to further improve their economic performance. Independent management of shop-in-shops currently run by wholesale partners is another means of enhancing the attractiveness of the brand presentation and tapping additional sales and earnings potential.
Over the last few years, HUGO BOSS has boosted its sales significantly in both physical retail and online business. Moving forward, it will create closer links between these two channels to offer consumers a seamless, integrated brand and shopping experience.
HUGO BOSS is very well known around the world thanks to the appeal of its brands and its early entry into international markets, particularly through franchise partners. The Group sees substantial opportunities for commercially exploiting this brand perception in the coming years more than in the past and for gaining a firmer footing in markets in which the Group’s presence is still relatively weak, particularly fast growing markets.
However, Europe will remain the Group’s largest sales market. By expanding its own retail business, the company is strengthening the homogeneity and perceived value of its global brand image. Apart from expanding its market position in traditional core markets such as Germany, Great Britain, France and the Benelux countries, the Group sees attractive growth opportunities in Eastern Europe including Russia and in the Middle East.
In the Americas HUGO BOSS is associated with modern design characterized by slim cuts. In addition, the brand is seen as possessing a high degree of reliability with respect to fit and quality as well as an attractive value proposition. In its wholesale business the Group is concentrating on strengthening the partnerships with retailers in the premium market segment to optimize its brand presentation and reduce discounting. The introduction of shop-in-shop formats, some of which are run directly by the Group, is an important tool in this respect.
In Asia and particularly in China, the Group is investing in the quality of its retail presence and brand perception. In addition to the renovation of existing stores and selective closures, the closer alignment of selling prices with the levels in Europe and Americas sustains the brand’s favorable value proposition and builds consumer trust. In its communication activities, HUGO BOSS stresses the brand’s heritage in menswear clothing, which accounts for a substantially lower proportion of sales in Asia than it does in other regions. Furthermore, attractive potential has been identified in sportswear and womenswear, which is targeted at the fast-growing group of fashion-conscious professional women.
The fundamental principle followed by HUGO BOSS is to keep control over all business-critical processes. High-performance operational processes allow the Group to develop, source, produce and deliver high-quality products in large numbers efficiently, fast and on an industrial scale. This affords HUGO BOSS the opportunity of gaining a competitive edge by swift reaction to market changes, an advantageous value-for-money proposition and high supply reliability. The Group is continuing to focus on optimizing operational processes in line with the requirements of its own retail business.
HUGO BOSS has closely integrated the product design and development process with industrial manufacturing and sourcing. By using its own production facilities, the Group secures critical expertise while enabling development activities to be closely geared to subsequent industrial manufacturing. A high-performance SAP-based IT infrastructure uniformly deployed worldwide effectively supports the operational processes of all functions and creates the transparency needed for making entrepreneurial decisions.
In the past few years, the Group has taken great efforts to optimize its logistics processes in line with the transformation of its business model. In addition to the construction of a new flat-packed goods distribution center in Europe in 2014, the successful insourcing of online fulfillment in early 2016 was a milestone for offering omnichannel services in Europe.
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