Hugo Boss Plans Record Marketing

Hugo Boss AG (BOS), the German luxury clothing company, will spend a record amount on marketing this year to support the reintroduction of the Boss Selection line following a positive response from retailers.

Spending on advertising and sponsorship will increase to about 6 percent of revenue from last year’s 5 percent, Chief Financial Officer Mark Langer said in an interview at the clothier’s Metzingen headquarters. Marketing expenditure rose 23 percent to 90.9 million euros ($131 million) in 2010, returning to the level of previous years after declining in 2009.

“Retailers have reacted very positively to our new Boss Selection collection,” Langer said. The collection, which includes casual leather jackets for as much as 2,000 euros, was first shown at the Pitti Uomo fashion show in Florence, Italy, where the clothier booked one of the biggest exhibition stands and focused solely on the line, he said.

Boss Selection represents about 4 percent of group sales, which the company forecasts will grow at least 12 percent this year, excluding currency shifts. Hugo Boss, which gets almost two-thirds of revenue from Europe, is benefiting from rising demand for men’s wear in China, where it started a joint venture with retailer Rainbow Group last year, the executive said.

Chinese people “are crazy about brands like Hugo Boss and they are willing to pay much higher prices than western customers,” Thomas Effler, an analyst at WestLB, said in an interview. The Frankfurt-based analyst has a “neutral” rating on the stock.

Share Outperformance

Hugo Boss has outperformed the broader German market this year as most analysts advise clients to buy the stock. The preferred shares have risen 16 percent in 2011, compared with a 6.1 percent gain in Germany’s MDAX index of mid-sized companies. Fifteen of 22 analysts monitored by Bloomberg have a “buy” rating on the stock, with only one advising clients to sell.

The new Boss Selection line offers a wider range, including casual wear and sportswear, making the seasonal collection 25 percent to 30 percent bigger than before, the company said.

The increased advertising will demonstrate that the company is putting new clothing ranges into stores more frequently, Langer said. Hugo Boss has reduced the time taken to get fashions from the design board into stores by 12 weeks to 38 weeks, according to the executive.

“The customer shall learn that the themes of our collections are changing every six-to-eight weeks,” he said.

The clothier will introduce its first winter collections, which have been produced more quickly than usual, in October.

Chinese Expansion

The new process will be of particular importance for women’s wear and sportswear where fashion changes faster than for men’s business suits and shirts, the CFO said.

China will probably become Hugo Boss’s third-largest market this year, overtaking France and the U.K., while still lagging behind Germany and the U.S, according to Langer.

The clothier operates three Selection mono-brand stores in Shanghai, Singapore and Macao and plans to add more in the Asia- Pacific region, he said.

Mainland China, which doesn’t include Hong Kong, Macau or Taiwan, will remain the fastest-growing market for high-end goods in 2011 as sales rise 25 percent to 11.5 billion euros, Bain & Co. said May 3. The country may become the world’s third- largest luxury market in five years, the consulting firm said.

To contact the reporter on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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