BERLIN (Reuters) - Hugo Boss (BOSSn.DE) said on Thursday that improving its online business will be a top priority this year as the struggling German fashion house hopes to avoid another decline in sales and cement a recovery in China.
The company known for its smart men’s suits is in the midst of restructuring under new boss Mark Langer after his predecessor Claus-Dietrich Lahrs quit last February as sales slumped in China and the United States.
Hugo Boss said it expected currency-adjusted sales to be stable in 2017 after it reported a 4 percent fall in 2016 to 2.69 billion euros ($2.8 bln), with online sales down 9 percent to 76 million euros, less than 3 percent of the total.
Analysts expect online transactions to represent 20 percent of all luxury sales within a decade, up from 7-8 percent now.
“Online and retail stores must be more closely linked together,” Hugo Boss’s sales chief Bernd Hake told journalists.
The company plans to roll out services like “click and collect” to stores across Europe by the end of 2017.
Luxury goods group LVMH (LVMH.PA) is planning a new digital platform to host all of its brands, sources close to the matter told Reuters on Thursday, as the French company steps up efforts to capitalize on the sector’s online sales boom.
Ecommerce sales at Hugo Boss were disrupted in 2016 by a move to fulfil orders in Europe itself, instead of via a partner, and the relaunch of its website, but the company said they should return to growth during the course of 2017.
It also plans more digital marketing, forecasting it will spend 70 percent of its budget online and only 30 percent on print in 2017, compared to a 50-50 split two years ago.
Digital communication had been an important driver of its recent recovery in China, it said, noting a big jump in followers on Chinese social media sites WeChat And Weibo in 2016.
Hugo Boss has also slashed prices in China to bring them closer to European and U.S. levels, helping sales there rise by almost 20 percent on a like-for-like basis in the fourth quarter.
Rivals like LVMH, Cartier owner Richemont (CFR.S) and British brand Burberry (BRBY.L), have also signaled better demand in mainland China in recent months as well as improving tourist spending elsewhere.
Hugo Boss shares, which jumped last month after a report that Belgium’s richest man, Albert Frere, had taken a stake of nearly 3 percent, were up 1.1 percent by 1159 GMT.
The company said it had saved more than 100 million euros in costs and investment in 2016 and it would continue to keep a strict control on expenses in 2017, helped by renegotiated rents and the closure of loss-making stores.
Hugo Boss said that retail selling space would be stable in 2017, with 10-15 new stores planned, but another 15 closures to be completed by the end of the year.
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Additional reporting by Anneli Palmen in Metzingen; Editing by Susan Fenton