Responsible for Creative Management,
Brand Management, License Management,
PR Fashion, Global Advertising
Responsible for Corporate Strategy
and Communication, Controlling, Finance,
Internal Audit, Central Services, IT,
Legal/Compliance, Human Resources,
Global Sourcing and Production,
Supply Chain Management
2016 was a relatively turbulent year for HUGO BOSS. What‘s your overall assessment of the past 12 months ?
Does that mean that you have realigned HUGO BOSS strategically ? Or are the changes simply minor adjustments ?
Mark Langer: Some are minor and others involve major realignments. For example, in light of the less than propitious market conditions we have slowed the expansion of our retail operations. We had been growing our store network very quickly, too quickly in some places. For the time being we will be focusing on operating existing venues more profitably. But the evolution of customer behavior has also necessitated fundamental changes. We need to integrate our retail, wholesale and online sales channels intelligently. We also expect our concentration on the two brands BOSS and HUGO to boost growth.
Mark Langer: That’s right. We are realigning what is ultimately a highly profitable and healthy business model to fit changing customer behavior.
Reviewing the past year self-critically, might you with hindsight have been too optimistic ?
Mark Langer: We overestimated the development of the U.S. market. Earlier adjustments failed to bring the improvements we had hoped for. We had distribution models that caused sustained damage to the brand in the United States. Since then we have taken the tough steps needed and are guiding the brand back to where it belongs: the upper premium segment.
Bernd Hake: We are back on track there now. We achieved a turnaround during the second half of the year in China and clearly outperformed our competitors. Attractive products, ranges aligned more closely with local demand, better training and new personnel have had the desired effect. In conjunction with significant price cuts, we have succeeded in getting Chinese customers excited about our brand again. In a nutshell: we acted very wisely in moving our prices in China closer to global levels. In our view there is still considerable potential for growth here.
Bernd Hake: Europe really is a divided market for us. The further north we are, the better things go. Great Britain in particular is still posting very good results. By contrast, the German apparel market remains problematic. For years any growth has been chiefly in the volume rather than the value of sales. Nevertheless we will be rigorously enforcing the pricing adjustments required in the market and therefore – it’s important for me to state this here – offering our products at superior value for money. Last year Belgium and France represented an anomaly due to the fallout from the terrorist attacks. The tourism segment took the biggest hit.
Bernd Hake: Yes, with the pound in the doldrums, foreign tourists in particular are visiting Great Britain.
Bernd Hake: In the short term, yes. But we need to wait and see how much Brexit undermines the country’s economy and whether companies and the banks start leaving. So far there has been no sign of this. Additionally we have a strong and loyal customer base in the UK that has driven our outstanding success there for years.
This year you not only continued to harmonize product prices. You also took steps to reduce costs. How deep were the cuts ?
Mark Langer: As deep as necessary. We are parting with loss-making stores and have used the depressed market environment to renegotiate rental agreements. Overall cost discipline within the company has improved significantly over the past 12 months.
So you are parting company with loss-making stores. Does this mark the end of the network’s expansion ?
Bernd Hake: Currently we are focusing more on improving the productivity of our sales space than on extending it. With almost 450 freestanding stores of our own, we are adequately represented in all the relevant markets. Yet we naturally want to push ahead with our global expansion strategy, doing it in a selective way, above all in Asia where the upper middle classes are growing very fast.
Bernd Hake: As in the past, wholesale remains very important to us. However, I expect the retail share of our sales to increase slightly. At the same time, our goal is to continue growing together with dynamic wholesale customers. Most likely the ratio between retail and wholesale will end up at about two to one.
At three percent, the share of online sales is still comparatively low. Why is that ?
Mark Langer: It’s partly because this figure only refers to our own online activities. If you include our wholesale partners and the vendors that operate exclusively online, our proportion of online sales is in the high single-digit range. But there’s no denying that we aren’t where we want to be at the moment. During the past year we have integrated our entire online team into our headquarters. That was a key prerequisite for boosting online growth. We also plan to forge ahead with our omnichannel strategy. Customers want to find our store products online and see the products we sell on the internet in our stores.
In future HUGO BOSS will be focusing on the two brands BOSS and HUGO. What benefits are you anticipating ?
Ingo Wilts: Most recently our brand strategy has not been as coherent as it should have been. The customers have made that amply clear to us. We have been offering three brands under the BOSS logo – Black, Orange and Green – which were not consistent in terms of positioning and image. In future we will be addressing just two target groups – BOSS and HUGO customers – and doing so with clear messages.
Ingo Wilts: BOSS is for customers who want perfect collections and outstanding quality. HUGO, by contrast, will continue to be our progressive, cutting-edge brand. It appeals to highly trend-conscious customers and will be priced 30 percent below BOSS, making it very attractive.
Will the new brand strategy also produce tangible changes to the collections ?
Ingo Wilts: By no means. Our Made-To-Measure and Tailored products are still very much in demand. They demonstrate our exceptional competence in suits. However, we will be significantly extending and upgrading our offerings in the entry-level segment, where demand is very strong.
You want to move menswear back onto center stage. What will that mean for the womenswear ?
Ingo Wilts: Womenswear will continue to be a part of our core business. However, we will be scaling the marketing back to a more normal level and shifting the focus back toward the men’s collections. Menswear has always been the wellspring and backbone of HUGO BOSS. That is also why we presented BOSS Menswear at the New York Fashion Week this year. And the fashion press responded very positively.
The headlines in the press about sustainability in the fashion industry are less positive. How seriously does HUGO BOSS take this issue ?
Mark Langer: It’s right at the top of our agenda. Last year we invited critical stakeholders to an open discussion of the issue for the first time. Needless to say, we are taking their feedback to heart. We are very aware of what people expect of us. Ultimately our “license to operate” is on the line here.
Mark Langer: It will be a year of putting plans into action. We have a lot on our plates: just think of the reorientation of our brand portfolio, the global harmonization of our prices and the restructuring in the United States. The market environment remains the big unknown factor. The numerous political uncertainties and their potential impact on the real economy don’t exactly make the situation clearer. However, I am confident that we will perform very well.
Mark Langer: That will be the case next year. We will have laid the foundations for sustained growth by 2018 at the latest.