Consumer

Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

A rising tide lifts all boats -- even the good ship Hugo Boss.

That would be one conclusion to draw from Hugo Boss AG's decision to raise its forecast for full-year sales growth. But that would be only part of the story.

The company has no doubt been helped by the broader luxury revival, including among Chinese consumers, who account for about 16 percent of the company's sales, according to Exane BNP Paribas.

But as Gadfly has argued, Chief Executive Officer Mark Langer is also taking the right actions to put the company back on track.

Almost a year ago, he set out a strategy to revive the maker of smart suits and premium casualwear after a string of profit warnings. That included culling peripheral brands, investing online, closing stores, and refocusing on its core customer, Mr. Hugo Boss.

That appears to be paying off sooner than expected. After all, Langer warned when he set out his blueprint for change that growth wouldn't come through until 2018.

Instead, he has delivered impressive same-store sales expansion of 5 percent in the three months to Sept. 30, an improvement on the 3 percent in the preceding quarter.

Bossing It
Hugo Boss has generated a return to impressive same-store sales growth
Source: Bloomberg

There are still some wrinkles in the suit that could still spoil Hugo Boss's new look.

The first is that, despite Langer's efforts, Boss remains exposed to apparel, where growth across the whole luxury sector lags that of accessories. It also still has a big suiting business, which is vulnerable to economic gyrations and the casualization of the workplace. Indeed, it was off-duty wear and athleisure -- sporting apparel worn outside of the gym -- that led the sales growth in the third quarter.

Finally, Boss could feel some pain from a strong euro, although it has less exposure to a strengthening common currency than some rivals, according to analysts at HSBC.

Right Balance
Boss should benefit both from the Chinese revival and strength in its home market
Source: Exane BNP Paribas

Investors certainly appear to be shrugging off these doubts. The shares rose as much as 8 percent on the sales upgrade. They are now up about 45 percent since Langer unveiled his turnaround strategy, and have shed their deep discount to the Bloomberg Intelligence Luxury Peer Group.

Not Just Suits
Hugo Boss has lost its discount to rivals and now trades at a small premium
Source: Bloomberg

For Boss to achieve a significant premium to the index it must show that it can turn the nascent sales growth into a full-blown corporate revival, and that the latest good showing isn't all due to better conditions in the broader luxury market.

Spring 2018 styles land in stores in a few weeks. They will be the next test of whether Langer really is reconnecting with Mr. Hugo Boss.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at afelsted@bloomberg.net

To contact the editor responsible for this story:
Jennifer Ryan at jryan13@bloomberg.net