Hugo Boss revenue expectations at a halt

Hugo Boss is one of the most highly coveted brands for men’s suiting in the world. A Hugo Boss suit has long been seen as a rite of passage for those fashion lovers. Despite their name being synonymous with a fine suit, the brand reports that their sales growth slowed in Q4 of 2014. While this is disappointing news, the brand still ended their year with their revenue on a positive upswing, and not only that, but their women’s wear is doing very successfully, all thanks to the brilliant and gifted Jason Wu.

In Q3, Hugo Boss reported a 9 percent growth in sales, but ended the last quarter of the fiscal year with only a 5 percent growth in sales. This is not in part to Hugo Boss losing any of its luxurious appeal, however, but, rather, the demand for high-end clothing slowing down in the European markets. Hugo Boss’s final revenue growth by the end of Q4 was approximately 783 million dollars.

Jason Wu still doing wonders for Hugo Boss women's wear

While these numbers are still positive, it is far lower than what Hugo Boss was expecting, with hope for growth somewhere in the high single digit percentages. Jason Wu’s new women’s wear collection for the brand, though, is outpacing all other facets of the brand, however, which is good news for Hugo Boss, as their women’s wear had been critiqued in the past for becoming stagnant, boring, and below par compared to their menswear. Despite Wu’s success with Hugo Boss women’s wear, sales still only rose 6 percent, which was lower than what retail analysts had expected, with projected growth originally being 8 percent.

Unfortunately for Hugo Boss, the economic situation in Europe is out of their hands. To ameliorate a less than stellar situation in the European markets though the company is focusing on how to improve their presence in the Middle East and Asian markets. In a press release from Hugo Boss the morning of February 4th, 2015, they stated that they would be taking over full control of their operations in Korea and the Middle East, and that they would also be taking over their last remaining franchise stores in China.

In addition, Hugo Boss will be taking full control of their 17 franchise operations in Korea from their partner, TDco Limited, effective March 1st, 2015. As for China, Hugo Boss’s last franchise partner, Wenzhou Nobel, will pass full control of all 21 Hugo Boss stores over to Hugo Boss effective April 1 st, 2015. Once full control is passed to Hugo Boss they will operate approximately 130 stores on the Chinese mainland.

In regards to the Middle East, Hugo Boss intends to set up a distribution facility in the United Arab Emirates sometime in 2015, with intentions of it taking over distribution in both the Middle East and Asian markets by January 2016. Hugo Boss hopes that these changes to their operations in Asia and the Middle East will help to improve their profits by up to 1 percent in total group sales. "In taking the action announced today, we are executing on our global growth strategy, which is aimed at achieving extensive brand control and running retail operations ourselves," commented Claus-Dietrich Lahrs, CEO of HUGO BOSS AG in their press release.

While full year fiscal results will not be released for Hugo Boss until after fashion month, it is no secret that the numbers, while positive, are not to Lahrs’ liking. The brand has much promise for the Asian market, with Wu being one of their aces in the hole given the booming women’s wear market in China. Despite Wu’s designs being able to wow the fashion industry, the brand is still expecting another challenging year.

In Frankfurt, Boss’s shares fell as much as 5.7 percent on the news of their Q4 earnings. With the political unrest in Ukraine and the economic situation in Russia, damage was sure to be done to Hugo Boss’s profits as well. While the Eastern European market might be a no-go for right now, Boss hopes to turn their company around through growth in other global sectors, and it looks like they are well poised to do so with their takeovers of the Asian and Middle Eastern markets.