Hugo Boss CEO Sees Europe’s Economy Under Pressure Through 2014

Hugo Boss AG, the German luxury- clothing maker that gets about 60 percent of its revenue from Europe, expects the region’s economy to struggle through next year, forcing it to seek growth elsewhere.

The proportion of sales Hugo Boss gets from Europe may fall to about half by 2015 as the suitmaker expands in the U.S. and Asia, Chief Executive Officer Claus-Dietrich Lahrs said in an interview today at the company’s headquarters in Metzingen.

“I see the European economy under pressure even in 2014,” Lahrs said. Concern about unemployment and cuts in public spending will be “with us for a moment.”

Hugo Boss is expanding in the U.S. and Asia as the euro- area economy will shrink 0.3 percent in 2013 after a 0.6 percent contraction last year, the first back-to-back decline since the euro’s debut in 1999, according to a European Commission forecast. Still, the recession in the 17-nation economy has reached a bottom, Lahrs said, adding he’s more confident about the bloc’s economy than a year ago.

“The daily discussion about whether the euro is going to survive is gone, which is already a positive,” Lahrs said. “If a couple of very important decision makers stand out and say the euro will not disappear, then the euro will not disappear.”

Unemployment across the region will be about 12.2 percent in 2013, with joblessness as high as 27 percent in Greece and 26.9 percent in Spain, the European Commission has said.

The CEO said Hugo Boss is still opening stores in southern Europe whenever it finds good locations.

Year-End

Lahrs said he expects the second half of 2013 will be a bit more “encouraging” than the end of 2012 and the beginning of 2013. European sales rose 10 percent last year excluding currency shifts, and the CEO said he expects revenue growth in the region this year.

The company forecasts revenue of 3 billion euros and Ebitda of 750 million euros in 2015, rising 28 percent and 42 percent respectively from last year’s levels. The clothing retailer said the retail business will represent about 55 percent of revenue by that year as it opens about 50 stores annually.

Sales from retail exceeded wholesale for the first time in 2012, and the owner of the Boss Orange brand will boost spending this year to expand the network further.

“In 2008 we were one-third retail and two-thirds wholesale, by 2020 we are going to see the opposite ratio,” Lahrs said.

The company is more confident now than last year it can achieve its target of $1 billion revenue in the Americas by 2015, Lahrs said.

There is “very strong momentum” in U.S. retail and consumption, the CEO said, adding that Mexico and Brazil will also boost revenue.

In Asia-Pacific, where the maker of men’s suits has about 27 percent of its stores, consumer sentiment will recover in the second half of 2013, Hugo Boss forecast. The company will open flagship stores in Shanghai and Tokyo this year. It plans to get more than 20 percent of its revenue from Asia by 2015 as it upgrades its Chinese retail network and as business improves in Japan and Australia this year.

-- Editors: Thomas Mulier, Celeste Perri

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

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

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