Hugo Boss Doubles Marketing Spend, Plans Record-breaking Year
Hugo Boss is placing its bets on its revamped branding and the biggest marketing campaign in its own history to promote it.
The company doubled its marketing spend in the first quarter of 2022 to 80 million euros, has been racking up millions of followers and views on social media and put up billboards in 40 cities around the world.
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In fact, Hugo Boss won’t be attending the Pitti Uomo menswear trade fair in Florence next month because its online events have been so successful. “We were particularly active online [this quarter],” Hugo Boss’ chief financial officer Yves Muller said during a telephone conference call on the German brand’s first-quarter results.
He noted that Hugo Boss’ recent, hyped events in Dubai and during the Coachella music festival had “created a lot of atmosphere. That’s why we’re not going to Florence.”
It is a strategy that seems to be paying off. In the first quarter of this year, the brand’s sales rose 52 percent, currency adjusted, to 772 million euros, compared to the same period in 2021. With those numbers, the brand beat market expectations — analysts had predicted about 704 million euros in sales revenues. Hugo Boss noted that sales were also higher compared to pre-pandemic levels in 2019. Compared to first quarter 2019, when the marquee brand made 664 million euros in sales, these results reflected a 17 percent increase, currency adjusted.
Muller said Hugo Boss’ early summer collection, the first to completely reflect the branding refresh, was also selling far better than expected. Of this collection, more casual looks featuring denim, jersey and sneakers were doing particularly well.
The first-quarter sales increase indicates what appears to be an ongoing return to form for the brand: Sales revenues also rose 51 percent in the last quarter of 2021. Previously, the German company had been averaging single-digit percentage growth most quarters.
Sector analysts from the likes of Goldman Sachs, Warburg Research and JP Morgan agreed, with several saying that a new dynamic was becoming apparent and others describing the company’s first quarter as “positive” and “solid.”
In Europe, Hugo Boss’ biggest market, sales rose 69 percent over first quarter and brought in 505 million euros. Averaged out over the last three years, with pandemic-related ups and downs, this reflected an increase of 21 percent. The company reported that sales in France and the U.K. were particularly good.
Hugo Boss will be opening a new flagship store on Oxford Street in London in the next three months, finance chief Muller said.
The war in Ukraine was not having a major impact on its European consumers’ attitude as yet, the company said in April. Although the brand had closed 11 franchise stores in Ukraine and 28 of its own stores in Russia, it would make up the shortfall — around 3 percent of its total income — with sales increases in other countries, it said. Hugo Boss is still paying salaries to around 200 staff in Russia.
In the Americas, Hugo Boss sales rose 56 percent in the first quarter to hit 134 million euros. This averaged out to 17 percent growth on a three-year stack basis. In 2019, Hugo Boss generated sales of 115 million euros in the region.
Muller told WWD that, although Hugo Boss has a reputation for formal menswear — a sector that still makes up the bulk of its sales — the company was pushing casual styles harder in the U.S. “We have consciously adapted our range there,” Muller explained.
Earlier in the year, Hugo Boss released a third capsule collection in collaboration with the National Basketball Association and the German brand had also established a good relationship with Macy’s department store, which is “also sort of reinventing themselves,” Muller said. “We’re really happy with what’s happening in the U.S.”
The Asia Pacific region was a different story. There, the brand’s sales rose 3 percent, currency adjusted, to bring in 110 million euros. Sales in mainland China slipped 13 percent, which dragged down figures for the rest of the region, the company said in a statement, emphasizing that recovery in other countries, such as Australia and Japan, continued.
Hugo Boss has previously stated it had not been as impacted by a Chinese consumer boycott of Western-made goods as have other companies. The current sales slip was the result of COVID-19-related lockdowns in China, Muller explained. The year had started well in mainland China but by early March, around a third of the brand’s stores were closed or seeing reduced traffic.
Hugo Boss’ EBIT — earnings before interests and taxes — also beat market expectations, coming in at 40 million euros. Analysts had predicted an EBIT of 36 million euros.
In 2019, the last “normal” year before the pandemic, Hugo Boss’ EBIT was 55 million euros in the first quarter. The company explained that marketing investments were the reason for the decrease in first-quarter 2022. Operating expenses as a percentage of the company’s sales remained stable, though, coming in at around 55 percent in both 2019 and 2022.
There was growth in all sales channels but the increase in digital channels was notable. Sales in digital channels increased 22 percent, currency adjusted, over the first quarter of 2022 to bring in 146 million euros. Compared to 2019, digital sales have grown 145 percent.
This reflected not just the impact of the pandemic but Hugo Boss’ spend on promotions in this area — the company has recently run some of its most successful online campaigns, relaunched its website in January and wants digital to make up to a third of all sales in the next three years.
Despite all the positive results, Hugo Boss did not raise guidance and confirmed its previous outlook for the full year. Muller reeled off a list of possible problems that meant a more conservative prognosis was required — these included ongoing impact of the COVID-19 health crisis, political insecurity due to the war in Ukraine and the accompanying potential for changes in consumer sentiment, rising inflation and higher freight costs.
As a result, Hugo Boss will need to raise prices in the second half of the year, Muller revealed.
However, the company still plans to make more money than it ever has. Order books are full and Hugo Boss expects sales to increase between 10 and 15 percent over 2022 to bring in between 3.1 billion and 3.2 billion euros. It also expects an EBIT of between 250 million and 285 million euros, despite ongoing costs.
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