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Hugo Boss to cut brands and slow store expansion

Published 16/11/2016

Hugo Boss expects underlying profit to slump by between 17% to 23% this year
Hugo Boss expects underlying profit to slump by between 17% to 23% this year

Luxury fashion house Hugo Boss is to cut its brands, slow store expansion and adjust prices amid hopes of returning to growth by 2018.

The efficiency drive comes after the German group issued two profit warnings in the last 12 months following flagging sales, prompting cost cuts to deliver savings of around 65 million euros (£55.9 million) this year.

Hugo Boss expects underlying profit to slump by between 17% to 23% this year, b ut it hopes turnaround plans will return the company to growth by 2018.

The company's German-listed shares fell after the announcement, dropping nearly 6% in early trading despite the recovery plans.

Chief executive Mark Langer, who is outlining the company's new strategy at an investor event in London on Wednesday, said actions will include cutting its fashion range to two brands, Boss and Hugo, and folding its orange and green Boss labels into the Boss line.

Boss will focus on upper premium business wear , while Hugo will target younger customers, offering casual wear with a 30% lower entry-level price tag.

Mr Langer also aims to slow its store network expansion "considerably" as it focuses on wholesale and digital sales.

The overhaul will also see prices cut in Asia while they are raised in Europe, in a bid to bring global sales prices in line.

Mr Langer said: "By further developing our strategy we want to steer Hugo Boss back toward sustainable growth. We are sharpening our presentation and focusing on our customers' needs more consistently.

"In Boss and Hugo we have two strong brands with their own identity, which appeal to different target groups. With Boss we want to be the most desirable brand in the upper premium segment. Positioning Hugo in future as a progressive brand with an attractive value proposition will open up extra growth possibilities for us."

The group said 2017 would be a " year of stabilisation", and the majority of strategic changes would bear fruit in 2018.

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