November 15, 2018 / 7:44 AM / a month ago

Hugo Boss seeks boost from speed, online and Asia

BERLIN (Reuters) - German fashion house Hugo Boss (BOSSn.DE) set new targets to accelerate sales growth and lift profitability on Thursday as it seeks to react faster to trends, expand in Asia and quadruple the size of its own online business by 2022.

FILE PHOTO: An employee displays clothes in the Hugo Boss section in the Central Universal Department Store in Kiev, Ukraine, May 17, 2017. Picture taken May 17, 2017. REUTERS/Valentyn Ogirenko/File Photo

After Mark Langer took over as chief executive in 2016, the company known for its smart men’s suits abandoned his predecessor’s bid to go more upmarket and instead trimmed prices, launching more casual styles and investing heavily in its online offer.

Ahead of an investor day, Langer said he sees big growth potential for its trendier Hugo brand, which now accounts for 15 percent of sales, and for the group’s business in Asia, where 20 percent of sales should come from in 2022, up from 15 percent now.

Hugo Boss shares, which dipped last week on disappointing quarterly figures due to higher markdowns to shift unsold stock, rose 0.7 percent by 0920 GMT.

Hugo Boss set a target to grow annual sales by 5 to 7 percent each year until 2022, compared with a 2018 goal for up to around 5 percent. It wants its operating profit margin to reach 15 percent by 2022, a rise of almost 3 percentage points from 2018.

“We view management’s commitment to operating leverage targets ... to be an important turning point in Boss’s equity story,” said RBC analyst Piral Dadhania. “We are positively surprised by the revenue growth outlook range.”

Langer said Hugo Boss would seek to react faster to new fashions so it sells more products at full price by speeding up logistics, product design and development.

It is using data analytics to assess trends, and changing its design processes so it can wait until the latest possible moment to finalize collections, including by doing more digital design and cutting out the production of physical samples.

As textile production is automated, Langer said more manufacturing could be brought back to Europe in the coming years, which would also speed up deliveries to customers.

Hugo Boss hopes to drive a fourfold increase in online sales to about 400 million euros ($453 million) and also boost the share of sales coming from its own stores, more profitable than selling wholesale to department chains.

It also plans an efficiency program to increase retail sales productivity by an average of 4 percent a year, by speeding up renovation of its stores, improving its product range and better integrating stores with its online operation.

($1 = 0.8836 euros)

Reporting by Emma Thomasson; Editing by Maria Sheahan/Keith Weir

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